I was reading an article
today of the New York Times Business section about the Glass – Steagall ^* Act
of 1933. The law aimed at protecting depositors from business which were
speculative in stock market investing. Before this law went into effect, which
separated speculative banking from consumer banking, the stock market crashed
in 1929 which lead to the great depression.
This law was repealed in 1999
by the Clinton administration (he signed it into law) by the Gramm – Leach –Bliley
^* Act which liberated banking, such as Citigroup, and created an all in one
service. The idea that surfaced recently amid an election period in the United
States according to the New York Times Business, has no hopes of changing. But
suddenly both political parties have brought it to the agenda and are putting
it on the platform of their respective parties.
In 2010 the Dodd – Frank ^* Act
came as a more modern approach to the Glass – Steagall and became law as a
result of the Wall Street collapse of 2008 – 2009. The law bailed out the
financial industry and imposed new tougher regulatory restrictions. So why
changing the banking law has no possibility of even bringing it to discussions?
It would mean that there would be fewer jobs in the sector, since lending by
bigger banks would be slower. It would mean that the US banking industry would
be at a disadvantage to their European counterparts.
The Democrats are not willing
to change a law signed by a Democrat, and the Republicans do not want more
government involvement. And according to some, even if the Glass –Steagall would
have not been changed, there is no indication that the crisis would have been
prevented in 2009.
Bill T. Alexandratos, MSc. BA
Finance
^* It is common practice in
the United States to name a law after their founders, usually senators or
congressman.
