Why do people bring up AIG, Lehman, and Goldman Sachs in connection with Glass-Steagall?

[Recursion]

Do they not know what institutions Glass-Steagall covered? Or do they not know what type of institutions AIG, GS, and LB are/were?

Or do they think any of them started opening FDIC-insured retail checking accounts?

[litlbilly]

1. why dont you post this crap in the HRC group where it belongs

[Recursion]

2. Because I didn't vote for HRC in the primary?

I don't think I've ever even looked at that group.

[stevenleser]

5. You mean we're not supposed to discuss primary issues here? Have you not done so either? nt

[Lucinda]

46. This is exactly where this discussion belongs.

[NCTraveler]

63. Why can't this be posted here.

As a host of this forum, which I'm assuming you are, is this a threat to start locking informative and educational ops? Trying to figure out your demand.

[alcibiades_mystery]

3. ...

[Recursion]

79. I should have bought Redenbacher stock today

What can I say?

O'Malley left too early.

[Skwmom]

4. Your answer. To try to fool the American People is contemptible.

https://berniesanders.com/yes-glass-steagall-matters-here-are-5-reasons-why/


. The argument that Glass-Steagall didn’t cause the 2008 financial crisis is wrong.

Hillary Clinton told the Des Moines Register that “a lot of what caused the risk that led to the collapse came from institutions that were not big banks.” This is part of a longstanding pattern, in which she largely absolves the big banks from culpability for the 2008 crisis while emphasizing “shadow banking” in her own Wall Street plan.

Secretary Clinton returned to that theme during Saturday’s debate, pointing an accusing finger at non-bank entities like AIG and Lehman Brothers while giving a pass to Wall Street’s biggest banks for their role in the crisis.

Robert Reich, Bill Clinton’s former Labor Secretary, summarized the anti-Glass-Steagall argument as follows (without naming Hillary Clinton specifically):

“To this day some Wall Street apologists argue Glass-Steagall wouldn’t have prevented the 2008 crisis because the real culprits were nonbanks like Lehman Brothers and Bear Stearns.”

He follows that with a one-word response: “Baloney.”

Reich makes an important point: “Shadow banks” like AIG and Lehman, which largely function outside the normal bank regulatory system, are a major problem. But the 2008 financial crisis became a systemic threat specifically because too-big-to-fail banks were underwriting the risky bets these companies made. And why were the big banks able to do that?

Because Glass-Steagall had been repealed.

[longship]

8. Bing, bing, bing, bing, BING!

We have a winnah!

This is precisely what went on.

No repeal of Glass-Steagall, no 2008 economic meltdown. Period!

[Recursion]

16. That's a comforting falsehood, I know, but it was IBs and insurers and hedge funds that failed

None of which were previously covered by Glass Steagall*. The only failed bank that was was Citi, and the investments that brought it down were legal under Glass Steagall too.

* OK, under Glass-Steagall they were exempt from offering retail banking accounts, which none of them did anyways.

[truedelphi]

35. I guess you are being serious.

Glass Steagall is explained quite well here:

http://www.investopedia.com/articles/03/071603.asp

Notice that what it was about involves a great deal more than the FDIC situation.

BTW, the FDIC situation is rather bogus, because if the system went down, after the top bank or two failed, there would not be enough money to help out the rest of those with bank accounts other than the top two.

If Glass Steagall had been protected AND EXPANDED during the 1990's, instead of being taken away, there would not have been the credit Default swaps and the derivatives, and all the rest of that gambling nonsense!

But because the American people are so gullible, many people really believe that a bunch of poor people twisted the arms of mortgage brokers and bankers into giving them loans they couldn't afford. (It was actually the other way around - unscrupulous mortgage brokers preyed on people, and told them that it was good to get a zero down, zero percentage interest rate loan, and don't pay attention to those clauses about how after the initial zero percentage rate deal is over, the much higher rates would kick in. Only do not worry about those higher interest rates, because your house will be appreciating in value so much that it won't matter. And the real estate market bubble would only continue to expand and never ever contract.

What truly brought down the economy in 2008 was the bets placed against the idea that people would ever default on their mortgages. But most people have no understanding of the economy and have no idea of any of this.

[Recursion]

36. What do you think Glass Steagall had to do with CDSs or derivatives?

That's a new one. How do you see Glass Steagall as being related to either market?

[truedelphi]

86. Banks were not to be gambling institutions.

That was part of the reason for the creation of Glass Steagall.

And the article from 2012 in US News agrees with me. Very worthwhile read.

First two paragraphs -

The oldest propaganda technique is to repeat a lie emphatically and often until it is taken for the truth. Something like this is going on now with regard to banks and the financial crisis. The big bank boosters and analysts who should know better are repeating the falsehood that repeal of Glass-Steagall had nothing to do with the Panic of 2008.

In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law that separated commercial and investment banking for seven decades. If there is any hope of avoiding another meltdown, it's critical to understand why Glass-Steagall repeal helped to cause the crisis. Without a return to something like Glass-Steagall, another greater catastrophe is just a matter of time.
3###F

Further down in the article there is another remarkable two paragraphs --

It is true that the financial crisis has enough blame to go around. Borrowers were reckless, brokers were greedy, rating agencies were negligent, customers were naïve, and government encouraged the fiasco with unrealistic housing goals and unlimited lines of credit at Fannie Mae and Freddie Mac.

Yet, the fact that there were so many parties to blame should not be used to deflect blame from the most responsible parties of all—the big banks. Without the banks providing financing to the mortgage brokers and Wall Street while underwriting their own issues of toxic securities, the entire pyramid scheme would never have got off the ground.

Link for the full article:

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

[Recursion]

94. Right, but Glass-Steagall had no language about banks making risky investments

Glass-Steagall didn't prevent banks from making stupid and risky investments. It prevented them from brokering (some) securities to clients. But brokering securities to clients isn't risky for the banks, just for the clients.

[Skwmom]

38. I've heard bringing back an updated version of Glass-Steagall. Warren is the one who blessed

Clinton's bogus "Blame in on the Regulators" plan. That really said spoke volumes about Warren.

[Recursion]

39. It's certainly not a bad idea

And it would help unwind some of the mergers from the immediate aftermath of 2008 (eg BofA had to step in and buy Merrill Lynch).

[Juicy_Bellows]

12. + a butt ton.

A butt ton is a metric fuck ton for those unfamiliar with the term.

[Recursion]

13. I agree Sanders is trying to fool the American people on this, though I'm still voting for him

I agree with Elizabeth Warren that it wasn't causal to the 2008 crash at all, since the institutions covered by it weren't the ones that failed.

[Skwmom]

21. Well if Warren believes that she is a damn idiot or a sell-out. Considering some of the moves she's

made, my bet is on the latter.

[Recursion]

23. It's what she said when a reporter asked her

http://dealbook.nytimes.com/2012/05/21/reinstating-an-old-rule-is-not-a-cure-for-crisis/

But here’s the key: Glass-Steagall wouldn’t have prevented the last financial crisis. And it probably wouldn’t have prevented JPMorgan’s $2 billion-plus trading loss. The loss occurred on the commercial side of the bank, not at the investment bank. But parts of the bet were made with synthetic credit derivatives — something that George Bailey in “It’s a Wonderful Life” would never have touched.

When I called Ms. Warren and pressed her about whether she thought the financial crisis or JPMorgan’s losses could have been avoided if Glass-Steagall were in place, she conceded: “The answer is probably ‘No’ to both.”

Bringing back Glass Steagall is a decent idea, but one that's not particularly related to the financial crisis.

[Skwmom]

30. So I should take Warren's opinion as gospel?

[Recursion]

31. No, but you should ask yourself why bringing back Glass Steagall, which regulated retail banks

would have an impact on investment banks, which weren't covered by it to begin with (except, again, that it kept them from offering checking accounts, which none of them wanted to do anyways).

[Skwmom]

41. An UPDATED version of Glass Steagall needs to be put back in place. The crap Clinton is

proposing is a damn joke.

[Recursion]

42. Yup. Too bad neither candidate is talking about a proposal to do that (nt)

[ebayfool]

49. Warren also said in your link ...

snip/

Elizabeth Warren, the Democratic candidate for Senate in Massachusetts, sent an e-mail to thousands of her constituents, pressing to bring back the law, which she said, “stopped investment banks from gambling away people’s life savings for decades — until Wall Street successfully lobbied to have it repealed in 1999.”

Still, she said that the repeal of the law “had a powerful impact to let the big get bigger.” She also contended that its repeal, brought about by the Gramm-Leach-Bliley Act, “mattered enormously. It is like holding up a sign to regulators to back up.”

[Armstead]

77. Whether or not it would have prevented that specific crisis is beside the point

It's removal was part of a larger systematic removal of regulations, controls and anti-monopolistic regulation that allowed the economy to become too concentrated into too few hands (institutions and the people who control them) and emnabled bad behavior.

We need to pro-actively restore controls both to distribute the money more broadly and restore competition, and restrain the urges for bad behavior. GS, or an updated equivalent, should be part of that.

[Recursion]

78. I largely agree: it's worth restoring on its own merits

The specifics of the 2008 crisis don't really apply though.

GS, or an updated equivalent

If you'll give a bold or italic to "or an updated equivalent", I agree with you completely. Too bad no remaining candidate is actually talking about that.

[Armstead]

82. I frankly wish Bernie would be a little more nuanced about it

He does need at some point need to go beyond the "break up the banks and restore GS" and be more specific about the hows and whats.

But I understand what he's trying to do. It's not to bamboozle people. He's raising an issue that has seldom been talked about in the political sphere -- the need to restore more accountability, and to reverse the concentration of wealth and power in finance (and otehr industries).

I think he is keeping it simple because it is both a new message (at least in a presidential campaign), and because most people (myself included) are not familiar with the detailed intricacies of how finance works. (That includes people who may be smart in otehr areas.)

Unfortunately, presidential campaigns are the worst place to actually discuss the nuances of issues. All candidates either snow you under with plans that no one pays attention to and will never be enacted, or stick with a basic message of their goals.

I give Bernie some slack on this because I trust him and his experience as mayor and in Congress. He has been involved in the details of these issues. As Mayor he set the direction, built coalitions (including business) and also brought in a lot of professionals in specific area. her managed to both make local government effective, and also fiscally responsible.

I think as president he'd do the same. Move towards the goals he is talking about, but in a targeted and realistic way, and get into the sausage making side of it.

[Recursion]

83. Welcome to exactly the place I am (nt)

[jwirr]

92. No matter what caused the non-banks to fail they still were

connected to the too big to fail banks. By that I mean that the failure of the non-banks would have pulled the others down with them possibly causing a worldwide depression.

That is why they are called too big to fail because we cannot afford for them to fail.

The way the banking system is set up now everyone's money is setting in 6 huge banks that are not necessarily stable. Glass-Steagall would have kept at least some of our money protected if that had happened.

[Major Hogwash]

28. You win the thread.

Nice.

[Recursion]

32. That last sentence is complete bullshit, btw

And why were the big banks able to do that?

Because Glass-Steagall had been repealed.

Nope. I know you probably think that, but it's absolutely not true. Citi's investments were perfectly legal with or without Glass Steagall. You're charging the wrong hill here.

[jwirr]

89. Excellent point.

[revbones]

6. Agreed on moving this over the HRC Group, but I'll quickly answer

You should read up on commercial, investment and universal banks and their differences.

This is memory, and again you should look it up, but Goldman was converted to a universal in order to take advantage of the FDIC protections and prevent failure. That state would have been prohibited under Glass Steagall (if I'm not incorrect) and now allows entities such as Goldman to gamble with funds they should not be allowed to risk...

I'm not a banker, or a lawyer, but it's a fairly easy read to see that Glass-Steagall would prevent many if not all of the situations we had and will have again - much as it did during its lifetime before repeal.

[Recursion]

11. Why the hell does this belong in HRC? It's an issue in the primary, and I'm not a Clinton voter (nt)

[revbones]

15. Because the position you outlined is hers and false. See response #4

[stevenleser]

24. It's not false, your recollections are incorrect. And if incorrect assertions meant

You couldn't post in GD-P, a lot of stuff posted to support Sanders and attack Hillary would not have been able to be posted in GD-P.

[truedelphi]

90. So do you believe the Big Bankers' logic that since without Glass Steagall, the crisis of

2008 was able to be patched up quickly and effectively, we should not reinstate it, or do you believe that had we kept Glass Steagall around we would not have had the crisis to begin with?

not sure I can follow you? (I can tag the "her" in your header as meaning Hillary, but don't know what the other indefinite pronouns apply to?)

[Recursion]

25. And at any rate, Goldman has never, ever had FDIC protection

If you have some information to the contrary I'd really love to see it.

[stevenleser]

7. Good call. Bernie is strong on rhetoric, and very weak on substance and details.

For folks who don't really understand the nitty gritty details of the issues he talks about, he sounds very convincing.

His arguments basically boil down to "Banks Bad, Wall St. Bad, Billionaires Bad." If that does it for you, you are a Bernie supporter.

If not, if you actually understand the issues, he's not a particularly interesting candidate.

[Electric Monk]

9. See reply #4, or do you have them on ignore? This is the problem with big ignore lists.

I'm pretty sure you have me on ignore, too, but everyone else can read this still and form their own opinions

[madfloridian]

14. You are saying Bernie supporters are not very bright?

That we can't understand issues?

That's the kind of crap that is driving so many away from the party.

[Electric Monk]

33. Awesome hide, and no, I wasn't the alerter :) nt

[Hoyt]

57. That's rich after what Sanders' folks have said about Clinton supporters, particularly minorities.

[think]

17. How many times must a Wall Street bank violate US law to be considered bad?

Is lying to congress and your clients a good thing?

http://www.bloomberg.com/news/articles/2011-04-14/goldman-sachs-misled-congress-after-duping-clients-over-cdos-levin-says

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers that it also was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Now, a five-month McClatchy investigation has found that Goldman's failure to disclose those secret bets may have violated securities laws.

Read more here: http://www.mcclatchydc.com/news/politics-government/article24561376.html#storylink=cpy

Rigging of Foreign Exchange Market Makes Felons of Top Banks
http://www.nytimes.com/2015/05/21/business/dealbook/5-big-banks-to-pay-billions-and-plead-guilty-in-currency-and-interest-rate-cases.html

[Recursion]

19. What does Glass-Steagall have to do with Goldman Sachs? Or AIG? (nt)

[think]

20. In case you didn't notice my response was to Steve's comment. Not you.

[Recursion]

22. And in case you didn't notice I'm referring you back to my OP

You seem to think that either someone believes Glass Steagall would have prevented 2008, or one loves Goldman Sachs. I'm pointing out that I can believe Goldman Sachs is evil and not think that a regulation on a class of institutions that Goldman Sachs wasn't a member of wouldn't do much about them.

[think]

84. Goldman Sachs is corrupt and that's why IT needs to be broken up. As for JP Morgan, Citigroup, BofA

and other large banks, they are bigger than when they needed to be bailed out as too big to fail banks.

Then they became too big to prosecute according to Eric Holder.

As for GS and Glass Steagall they have eyes on GE's bank online with $16 billion in deposits which they couldn't obtain if Glass Steagall still existed. considering the reputation & record of Goldman Sachs many aren't happy to see them exploit consumer banking as well.

Breaking up the big banks relates to more than Glass Steagall and has a great deal to do with their propensity to find whatever legal loophole to exploit the law if not break it outright.

As for Glass Steagall and the 2008 melt down even Joseph believes that the repeal had a significant yet indirect effect that lead to the crisis:

THE ECONOMIC CRISIS - JANUARY 2009

~Snip~

The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.

~Snip~

Source:
http://www.vanityfair.com/news/2009/01/stiglitz200901-2

[aspirant]

26. You forgot Fox propaganda bad

[YCHDT]

50. thread winner ! ! ! ! ! ! This explains my whole opposition to Sanders

[Jitter65]

56. Couldn't agree more. Been trying to point this out to many and not just about banking and WS.

He does that with a lot of other issues as well...crime, welfare, and certainly with trade. If everyone followed Bernie's subscriptions we would trade with no one and have the costs of our consumer goods tripled, have most agricultural jobs in the hands of migrant workers at $15/hr, have at least half of our public colleges and universities closed, have not millennials training in apprentice positions for construction, engineering, mechanics, etc., and virtually making it impossible for anyone who didn't already have wealth to finance a startup business. I see much tougher banking laws and banks fleeing the US and making their home bases elsewhere and most people doing banking over the Internet (if they can) with banks and other financial institutions off-shore. With as many people as we have in this country, the healthcare system he is proposing would need really in-depth analysis before a verdict of pass/fail could be given.

None of our problems can be corrected or improved overnight with simple sweeping actions (that no Congress in history has done). Change yes, but it will have to be done gradually and in specific and steady order. Putting a cart before a horse in banking and major health care moves before fixing and modernizing the healthcare infrastructure will be disastrous...as we saw with many parts of the ACA.

[joshcryer]

10. Newsroom

[Major Hogwash]

27. Who was the President in 1999?

Why did he sign the bill into law overturning Glass-Steagall?

[Recursion]

29. Bill Clinton, and because he thought it was a good idea

I disagree with that (I'd rather have Glass-Steagall in place than not).

Now, what impact did the repeal of Glass-Steagall have on institutions like AIG and Lehman Brothers, which weren't covered by it to begin with?

[kristopher]

70. You've essentially begged the question.

Q: Who was the President in 1999? Why did he sign the bill into law overturning Glass-Steagall?

A: Bill Clinton, and because he thought it was a good idea.

That is an evasion but since you are playing that game:

Why did Bill Clinton think that repealing G-S was a good idea?

[Recursion]

71. I have no idea. I think repealing it was a bad idea

So I have remarkably little insight into the thought processes of people who thought that repealing it was a good idea.

[azurnoir]

34. ahem Glass- Steagall did cover Goldman and Lehman but not AIG

the former 2 are investment banking AIG is not and Glass-Steagall did have provisions pertaining to investment banking

Conversely, Glass–Steagall prevented securities firms and investment banks from taking deposits.

https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation

[Recursion]

37. It prevented them from opening retail banking operations to offer checking accounts

Did either of them do that after it was repealed?

[azurnoir]

40. Lehman folded and Goldman seems to be in the process or at least was

http://www.nytimes.com/2008/09/22/business/22bank.html?_r=0

[Recursion]

43. Which is why Glass Steagall prevented them from opening commercial banks

Which neither of them did.

I'm still missing the Glass Steagall connection here.

[azurnoir]

45. you just made the connection and it seems Goldman is taking advantage

of the Feds protections - it doesn't have to open a savings loan with toaster giveaways to do that

[Recursion]

47. But they didn't change to commercial banks, never have

Their only "insurance" is the unspoken guarantee that TARP represented, which again has nothing to do with their classification as investment or commercial banks.

[azurnoir]

48. They have access to the Federal Reserves lending and protection now something even more recent

but still prevented by Glass-Steagall

[YCHDT]

51. That's what they have NOW but was not part of why they failed

[Recursion]

54. But they didn't in 2008

They got it in response to 2008. Which is why Barney Frank kept pointing out that Glass Steagall being on the books would probably have made 2008 worse, since it would have prevented a lot of the bailouts.

[dreamnightwind]

59. See if this is of any interest

http://www.marketwatch.com/story/general-electric-sells-ge-capital-banks-online-platform-to-goldman-sachs-2015-08-13-171031521

Goldman Sachs Bank USA to get about $16 billion in deposits in deal
...

General Electric Co. has agreed to sell GE Capital Bank’s online deposit platform and about $16 billion in deposits to Goldman Sachs Bank USA.

The amount includes about $8 billion in online deposit accounts and $8 billion in brokered certificates of deposit.

Interesting that they acquired the banking arm of General Electric, after the crash, the auto bailout, and the government-led restructuring of GE. The article above says tht in order to reduce the "system risk" posed by GE, they sold off that part of their business.

This (the sale of GE Capital) would impact the next collapse, and would be a possible reason for Hillary to not want to reinstate Glass-Steagall, if I understand correctly, since she has such close ties to Goldman.

Goldman got FDIC protection starting late 2008.

[Recursion]

60. GE Capital was an IBank too

Glass-Steagall wouldn't impact that, but the capital reserves requirements could well.

Weren't the largest depositor banks sellling CD's that were invested in MBS's and the like? And wouldn't that have been prohibited by Glass-Steagall?

What? No. Why would you think that? Glass-Steagall never laid any restrictions on where banks can park their own capital. The FDIC does. And you don't need to be an IB to offer a security (even a shitty one) to a client. Glass-Steagall kept them from running a proprietary desk.

[dreamnightwind]

61. Sorry I was updating as you replied

and had removed that section since I rethought it.

[Recursion]

62. I do that all the time; no worries (nt)

[Lucinda]

44. KNR

[Depaysement]

52. Which institutions

Financed the mortgages, bought the securitized pools, issued nonbank LOCs and repo agreements and had loads of liar loans and underwater mortgages in their portfolios?

Answer: Banks.

Without the banks underwriting securitization, which they couldn't do under GS, how does all this get financed?

Answer: it doesn't.

[Recursion]

53. GS did absolutely nothing to prevent securitization or bad mortgage underwriting

Where did you get that idea?

[Depaysement]

64. Read my post

It's pretty obvious how GS played a role in the mortgage crisis. There's a difference between "preventing securitization," which no one claimed, and allowing conditions under which depositors' money could be used to finance it recklessly.

[Perogie]

55. Obviously you don't know what it is either

The term Glass–Steagall Act usually refers to four provisions of the U.S. Banking Act of 1933 that limited commercial bank securities, activities, and affiliations within commercial banks and securities firms. Congressional efforts to "repeal the Glass–Steagall Act" referred to those four provisions (and then usually to only the two provisions that restricted affiliations between commercial banks and securities firms [2]). Those efforts culminated in the 1999 Gramm–Leach–Bliley Act (GLBA), which repealed the two provisions restricting affiliations between banks and securities firms.


Directly from Goldman-Sachs Website:
Our Financial Institutions group provides financing and advisory services to institutions worldwide, including banks, insurance companies, asset management firms, financial technology companies and specialty finance institutions.
http://www.goldmansachs.com/what-we-do/investment-banking/industry-sectors/financial-institutions.html

[Recursion]

58. Yes, as I said Goldman Sachs was "prevented" from offering retail banking services

Which it never wanted to do to begin with. So was Lehman, who also never wanted to do that.

[DemocratSinceBirth]

65. None of them were banks./nt

[Recursion]

67. Ironic, no?

I'm a cynic.

Sanders is a demagogue, and I think he's the demagogue we need right now.

[DemocratSinceBirth]

69. I will refrain from making any characterizations.

[Recursion]

72. Appreciated

[DemocratSinceBirth]

73. I told you. I am jaded when it comes to politicians.

That doesn't mean I think they are bad people. It just means I think they are people with all the contradictions that make all of us who we are.

[Recursion]

74. I was an O'Malley supporter for a reason

I think he really spoke to that.

Anyways, that ship has sailed. But I definitely agree, people, and politicians, are much more complex than people make them out to be.

[randome]

66. Obviously "the banks" means every institution that deals in money because that's easier to digest.

So your attempt to be accurate is falling on willfully deaf ears. How soon before "the banks" is replaced by "the enemy", I wonder?
[hr][font color="blue"][center]Where do uncaptured mouse clicks go?[/center][/font][hr]

[Recursion]

68. Yep.

I'm not disagreeing, I'm saying this is the kind of demagoguery that works in 2016. Which is why I voted how I did.

[4Q2u2]

75. Follow the Money

Bottom line is that the money pockets were no longer separated and the left hand dipped into the right pocket for toxic investments. Being obtuse about Leman not having toasters and checking accounts does not change the fact that with GS the IB would have had to pay the Margin calls themselves and not have to be bailed out, because they had grown too big to fail. It also eliminated one leg of the Banking system because they all wanted in on the big fast cash, thus making all the institutions "to tightly coupled". Creating the domino effect.


"It was Glass-Steagall that prevented the banks from using insured depositories to underwrite private securities and dump them on their own customers. This ability along with financing provided to all the other players was what kept the bubble-machine going for so long."

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

http://www.nakedcapitalism.com/2016/01/why-larry-summers-is-wrong-and-bernie-sanders-is-right-on-glass-steagall.html

[Recursion]

76. That's just false

It was Glass-Steagall that prevented the banks from using insured depositories to underwrite private securities and dump them on their own customers

No, it wasn't.

Commercial banks could offer for sale whatever securities anyone was offering.

What they could not do before the GS-repeal was eat their own horseshit and buy it themselves with their own capital.

[4Q2u2]

80. No

The whole statement is correct, you are just cherry picking the word banks. If the Author stated GS prevented "Non Commercial Banks" ..."

And your very own last statement is what the rub is all about, that is one major part of what exactly started the fail. The Bank (IB's, Non Commercial and Commercial) had all become on Giant Horse creating shit and eating it themselves, or passing it off to their loyal customers, there were no longer firewalls to prevent total failure across the whole banking spectrum.

[Recursion]

81. Yes

The Bank (IB's, Non Commercial and Commercial) had all become on Giant Horse creating shit and eating it themselves, or passing it off to their loyal customers

Yep. And Glass-Steagall didn't address that.

[One of the 99]

85. Interesting!

I don't think that Glass-Steagall was solely responsible for the financial crisis but it was one of the contributing factors.

[jwirr]

87. One thing they did do is lobby to get it repealed?

[Fumesucker]

88. Why did Hillary bring up AIDS in connection with a Nancy Reagan funeral?

[Recursion]

95. Because she's got an absurdly tin ear sometimes (nt)

[shawn703]

91. From Joseph Stiglitz's Vanity Fair article in 2009

"The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act—the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn’t its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee. I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest—toward short-term self-interest, at any rate, rather than Tocqueville’s “self interest rightly understood.”

The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking."

[Octafish]

93. Because they are connected.

AIG got made whole, 100 cents on the dollar, to pay off all the bad bets made by Banksters they had insured. This could not have happened until the New Deal prohibitions against Wall Street speculating with taxpayer backed bank deposits was signed into law by President Bill Clinton.

I'd like to know why the people who profited from fraud haven't been made to put it back.