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« The "socialist" bugaboo | Main | Ipsos declares the WH a goner for Dems. Hogwash. »

October 16, 2015


Peter G

People who think Glass-Steagall or some variant of it would have prevented the 2008 meltdown do not understand what happened then. Ditto for those whose mantra includes banks too big to fail. As Bernie correctly noted in the debate the financial debacle eventually left the bigger banks even bigger. Apparently he doesn't know why. It was because they were the healthiest banks and the banks that the government of the United States could and did lean on to purchase the defunct remains of their weaker brethren. If they had not done exactly that the loan portfolios of those banks would have gone unserviced and the businesses in their thousands of every size that relied on their lines of credit would have been slaughtered. Bigger was clearly safer. It's a bit of a contradiction to be sure but is inherent in everyone's banking system. Smaller banks and regional banks are much more likely to engage in riskier behavior in attempting to compete with the giants. And also have greater exposure to local and regional or sectoral downturns.

Furthermore nothing in Glass-Seagall ever had anything to say about those highly leveraged credit default options that made AIG risk exposure so fantastic. Hillary is right about this. You have to regulate all of them or one of them will bite all the others in the ass.

Peter G

In a lighter vein here's an interesting take on who won the Democratic debate Bernie or Hillary:

The information contained therein provides some pretty impressive proof that online polls aren't worth the zeros and ones that accrue to generate their data. Witness the results from the poll conducted by The Street. So this blog's poll, devoted to all things Wall Streety, believes that Bernie won the debate over Hillary by 80 percent for Bernie of the respondents to 15 percent for Hillary? I guess those people think Bernie's proposed regulatory policies are better than Hillary's. Persoanlly I would have guessed that the Wall Streeter's for Bernie Crowd to be a very small club indeed.


Thanks for the link to the Pearlstein piece. He'll be added to my regulars.

Bernie speaks the language of the crowd he's playing for, whether he really believes Glass-Steagall played a pivotal role or not. The law has a delicious, New Deal flavor.


The Wall Streeter's for Bernie crowd might just hate him less than Hillary because they believe he can't win. And it's more fun for them than voting for any Republican is likely to be.

The Raven

The big investment banks, though, were instrumental in creating the slice-em-dice-em mortgage backed securities that were instrumental in destroying much of the savings of the US middle class.

"I'm the gansta banka I run a bigass bank / I put a s--tload of your money into things that sank."

Peter G

That's true but there was nothing to prevent it. Certainly Glass-Steagall wouldn't have done it. Nor would it have done anything about phony bond ratings or investment insurers le. AIG. Recreating it wouldn't address an of the regulatory issues that need to be addressed. Clinton is way ahead of Bernie on this.

The Raven

Given how much money the banks have contributed to Clinton's campaign, I think it is more likely there will be a whitewash, and nothing fixed until the next catastrophe. The Republicans and conservative Democrats seem to want a second Great Depression the way they want a second war in the Middle East.

Now, the pre-Reagan SEC would never have allowed this to develop. But I think we can forgive Sanders for not getting into the weeds on the matter.

For years now I have been saying "look to 2020," and I think that is still a good prediction.

Peter G

Maybe. And maybe not. What Bernie promises to do wont accomplish jack. So we're pretty much guaranteed that in the unlikely event he did get his way it won't achieve anything. I don't like show policies. You may recall the great outage when regulations forbidding the payment of executive bonuses from deposited funds was relaxed. It was the end of the world as we know it. Except that was bullshit. There was not the slightest chance of any executive failing to get their bonus based on this legal provision.

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