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In reply to the discussion: Has Hillary Clinton stated how she feels about Glass-Steagall? [View all]Recursion
(56,582 posts)I caveated in my footnote that that sentence you quoted wasn't really true but was a decent metaphor.
Money you deposit in a commercial bank essentially disappears, and becomes a liability on the bank's part. Money banks loan out isn't subtracted from some existing account somewhere, but is simply created out of nothing subject to limits based on the commercial bank's reserve account. (My point was that banks don't loan out depositors' money.)
What Glass-Steagall did was limit a commercial bank's ability to use its capital (of which part is its reserves) to purchase stocks and other securities.
That's a probably-good law, though if it had been in place in 2008 things might have been much worse at that particular moment because the retail banks could not have stablized the investment banks (I acknowledge that the fix at the time may have made things worse in the long term -- the whole point is this isn't a simple question).
There is a difference between commercial banking and investment banking - at least there was until G-S was repealed
But none of the failing banks were the newly-liberated commercial banks, except for Citi at the very tail end of things (BofA and Wachovia sank from investments that were legal with or without Glass-Steagall).