Aren't you sort of glad Congress repealed Glass-Steagall?

9 Comments to “Aren't you sort of glad Congress repealed Glass-Steagall?”

1. curious steve Says:
   Monday, September 15, 2008 at 9:15 am

   your brain is all scrambled, justin, maybe are put from the shock of the shameful crashing of the war-profiteering loan-sharks on wall street and main streets whom you count as your friends, if you think one near-death thief buys another in an attempt to fake good health, LOLOL.

   the real good news is, no one's buying the scam anymore!

   we the people will run you spinsters and your patron thieves broke and put you in prison. when you and your scare-mongering ("too big to fail") thieves are sentenced for life time of hard labor, justice will be finally done.

2. Linda S Says:
   Monday, September 15, 2008 at 11:31 am

   My main question about all this is - is BofA really as sound as everyone says it is? My understanding is that BofA has some huge issues with credit cards and other types of loans that haven't fully risen to crisis levels yet. Everyone keeps talking about BofA and JP Morgan as the "saviors" for the system. But, JP Morgan from what I remember about your article on the Credit Default Swaps market dwarfs EVERYONE. If there is a meltdown in that market, to me that means that JP Morgan might be gone. From everything I'm reading, it might not be possible to avoid a meltdown of the CDS market, so then the Bear takeover simply bought time before both firms go down. To me, I think this BofA takeover of Merill can only buy time before circumstances take out the whole firm. Wasn't Citigroup this kind of idea and it seems to me that Citi is in desperate trouble. If that's the case, how was the repeal a good thing? More troubling is that AIG is in serious trouble. So, it seems to me that it might be a good thing to restrict organizations to specific spheres in order to prevent such a wide ranging catastrophe.

   Also, my other question would be, how does it benefit the country if BofA and JP Morgan Chase are the only commercial/investment banks in the nation? I'm no authority on any of this, but I can't imagine that is in any way a healthy outcome for the nation. But, I guess only time will tell because I don't think anyone has an idea what's coming next.

3. TomT Says:
   Monday, September 15, 2008 at 11:37 am

   Justin, I agree it seemed like that repeal may have been a good thing.

   Please excuse my ignorance but is its repeal related to the changes in credit default swaps? And am I right in thinking that said changes are a big part of what caused this meltdown?

4. Justin Fox Says:
   Monday, September 15, 2008 at 1:22 pm

   @TomT: I'm kind of ignorant here too, but I don't see any connection between Glass-Steagall repeal and the rise of credit default swaps. What did happen is that Brooksley Born, as chairman of the Commodity Futures Trading Commission, tried to impose some regulation on over-the-counter derivatives like credit default swaps in the late 1990s, and was thwarted by Congress and Bob Rubin's Treasury Department.

5. TomT Says:
   Monday, September 15, 2008 at 1:41 pm

   Justin, by credit default swaps were deregulated by some amendment put into some bill by Phil Gramm, no?

   Sorry to be lazy about fact checking this -- I'm busy today

6. Linda S Says:
   Monday, September 15, 2008 at 1:48 pm

   Just to be clear, I wasn't trying to imply that the repeal led to the CDS market. I only brought up the CDS market to illustrate that the "savior" side of the Bear deal in JP Morgan has some very large exposure to a different market that seems very shaky. My point to Justin is why should we all be happy that the repeal allowed BofA to buy Merill if it just extends the collapse of both firms for a while and potentially leads to severe downside for average Americans.

   My next question is this - is it true that what BofA got was the ability to use commercial bank deposits to fund investment banking operations? That is what has been posted on different sites. If this is true, than this is truly not a good thing in my opinion because then BofA will just be using depositor funds to hide problems on its balance sheet until they can no longer do so and fail due to insolvency. I guess this means that JP Morgan will be doing exactly the same thing with Bear. Then this is transfered to the FDIC who doesn't have the money either.

   Please, please, please say that they are wrong. Or if they are not wrong, please explain to me why this isn't going to result in the new BofA/Merill or JP Morgan/Bear becoming the #1 commercial banking failure in US history?

7. Ali123 Says:
   Wednesday, October 1, 2008 at 9:14 pm

   Do you have brain fog or are you getting lessons from Sarah Palins school of thought. Before you post such an idiot comment, you should actually look up what Glass-Steagall is. Glass-Steagall was formed as a reaction to the Great Depression to prevent thousands of bank failures from ever to happen again. Now that the government got rid of it, we will have another Great Depression where half of all our banks will close because they are all linked to the financial banks. Because there is no Glass-Steagall, designed by the ultimate deregulator Phill Gramm, Citibank, Bank of America, and J.P. Morgan Chase, who bought the most toxic house loans, will become the mega monopoly banks that will control everybody's money at their beckon will, even as they overleveridge their own bank sheets with all our deposits. In time you will be sooooo sorry they got rid of Glass-Steagall when these banks rip you off and government bails them out because they are too big to fail. PLEASE READ THE LOS ANGELES TIMES ARTICLE WED, OCT 1,08 ARTICLE IN THE BUSINESS SECTION, "TOO BIG TO FAIL" OR LOOK UP GLASS STEAGALL IN WIKIPEDIA. PLEASE.

8. Justin Fox Says:
   Wednesday, October 1, 2008 at 10:14 pm

   Or, Ali123, you could read this:
   http://www.time.com/time/business/article/0,8599,1841981,00.html

9. menokia Says:
   Wednesday, October 15, 2008 at 12:09 am

   
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