What Glass-Steagall 2 Gets Wrong: Everything – Bloomberg 07-12-13

Salient to Investors:

Matthew C. Klein writes:

  • Glass-Steagall 2 would do nothing to protect us from the devastation we recently experienced.
  • The belief that the 1933 Glass-Steagal Act made the financial system safe and promoted decades of prosperity and that the 2007 crisis would never have happened if G-S had remained intact is a myth.
  • Iceland, Ireland and Spain all generated devastating debt bubbles without derivatives or complex securities. Countrywide, Washington Mutual, Wachovia and Indymac failed because they had made bad bets on mortgages amid a housing bubble.
  • Elizabeth Warren said last year that the financial crisis would not have been prevented by Glass-Steagall, but said the 1999 repeal sent a signal to companies and regulators that the financial industry could do whatever it wanted.
  • A better solution would be to raise equity capital requirements, protect consumers from products designed to take advantage of them, and separate money creation from lending.

Read the full article at  http://www.bloomberg.com/news/2013-07-12/what-glass-steagall-2-gets-wrong-everything.html

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