-18 votes

Bring back Glass-Steagall

Please sign the petition here:

http://act.credoaction.com/campaign/glass_steagall/

Tell Congress that we need a new Glass-Steagall Act that reinstates the firewall between the banks we use to keep our money safe and the Wall Street banks that make risky investments.



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When did local bank branches begin offering mutual funds?

When did local bank branches begin offering mutual funds? Was it in 1999, when Glass-Steagal was repealed? I don't recall being sold mutual funds every time I go to the bank teller window before then.

If that's the case, then every bank branch manager in the United States will resist the restoration of Glass-Steagal, since the ONLY way local banks are making any money these days is by collecting fees for handling customer money in those funds.

Banks are all about fees, not loaning money to the community.

Granted, I wouldn't mind if Glass-Steagal got rid of this service from the community banks. Wish it was sooner, before my mother was duped into transferring some of her quarter percent interest CDs into a mutual fund -- that promptly LOST her five percent.

"Tell him the good part." "The good part is, no matter whether our clients make money or lose money..., Duke & Duke collect their commissions."

"Cowards & idiots can come along for the ride but they gotta sit in the back seat!"

I always here neocons making this argument..

..probably because glass-steagal was repealed under a democrat administration. But the need for glass steagal and the derivative market are products of manipulated interest rates and fiat currency. The derivative market especially is the pinnacle of an economy based on crooked monetary policy and malinvestment which is the only inevitable outcome of a monetary dictatorship like what we have. You could not possibly reinstate glass steagal now that our markets have been thouroughly saturated and inflated with assets that are purely speculation. If it could be done it would force an immediate liquidation (which would be a very necessary endeavor) but at that point we would have to seize the moment to enforce a much more realistic monetary policy altogether which would rid us of the need to ever have a glass steagal because banks would be held to %100 reserve lending standards and would not have a federal reserve lender of last resort to bail them out when they became "too big to fail"

Unfortunately...

the $QUADRILLIONS of fake assets/derivatives in the system must eventually fail. And soon. Regardless of any Glass-Steagal activity either way. :\

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~wobbles but doesn't fall down~

Glass-Steagall was already dead prior...

to its "repeal". The investment banks had opened up consumer subsidiaries and were existing side-by-side under the same ownership.

The repeal was about keeping prying eyes off of what was about to become the largest fraud in the history of the planet.. the multi-$QUADRILLION derivatives scandal that still endangers, among many other groups, millions upon millions of elderly whose retirements are just going to vanish when the global derivative bubble finally collapses. Nearly all governmental retirement plans are LOADED with this garbage and most have no clue!

They were just drawing the curtains to and locking up the fort and taking away legal authority for them to be observed. And the reason they don't want to be observed is because they know their representation and sales of the derivatives are mere fraud. Interesting only in the techno-buzzwords cloaking them.

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~wobbles but doesn't fall down~

Glass-Steagall isn't a

Glass-Steagall isn't a perfect act, and it probably needed to be repealed. In principle, it shouldn't have existed.

But then how can one protect the money people save in banks? I'm not sophisticated on this issue, and I'd like a nice answer. Thanks!

Contrary to popular belief,

Contrary to popular belief, Glass Steagall didn't just add in up-side limitations to banks that "protected" consumers by preventing banks from making bets that the state deemed "too risky" based on the type of savings account. It also established downside protection in the form of FDIC insurance.

When you hear real free market entheusasists like myself claim that Glass Steagall should be repealed, it's not a gramatical mistake where I mean to say that I'm glad it *was* repealed. Only half of it was repealed.

As an an analogy:

Consider that you have a friend who is pretty good at counting cards. He plays safe, watching and waiting for the perfect opportunity, and never risking too much money, as any good card counter will tell you, they never can guarantee a hand will go their way, just that they can reasonably believe the odds are in their favor in certain situations.

So let's say he's good enough where you'd consider giving him your hard-earned money to let him try to earn a profit for you and collect a fee on the profit. Alls good so far, right? The degree to which you, and people like you, invested money with him would be related to the degree you trust him to make safe bets and maintain his conservative betting strategy. Sure, this involves some more work on your part - to have to be knowlegdable about where you invest and not just blindly be able to invest in any Joe Schmo who read "Bringing Down the House".

However this is no different than virtually every other decision you make in a freed market including: buying a house, a car, food, cell phone; what job to take; where to go to college; etc. It's what we call the "regulation by the market": the fact that a specific good or servie provider has to keep providing the buyer with a good or service that matches their needs, else the buyer goes elsewhere. It's not because of the state that the card-counter will maintain his safe strategy, but becasue you, as a buyer of investment services want to pay for a safe investment strategy, and if he doesn't provide that, you, and people like you, will take your money to a different card counter who will suit your needs.

However, now let's say the governmetn enters the picture and says 2 things:
1) They will make whole any losses any investors suffer in casions.
2) because they are willing to do #1 above, they are going to limit what types of bets card-counters make - after all, it would be severly incentivize card counters to take risky bets now that their own money is protected.

In such a enviornment you probably dont care as much where you invest your money. The conservative guy with the track record or the hot shot who just read a book on card counting? Who cares? Why even devote the brain-power and stress and time to figuring out the difference. The govt has your back and is regulating them as per #1 and #2 above, just pick one based on who promises you a higher return.

Now, lets say the card-counters successfully lobby the government to ONLY remove #2 above. I.e: they STILL have the govt backstop against losses, you STILL dont really need to care about where you invest becasue of the govt guarantee, etc. Yet clearly these gamblers will now have NOTHING regulating them - not the "free market regulation" discussed above, nor the govt regulation discussed in #2 above.

What essentially happened was that #2 was repealed and this was passed off as "repealing Glass Steagall". If you want to solve this than REALLY repeal Glass Steagall, ie: repeal BOTH 1 & 2.

hope this helps.

knowledge is power

knowledge is power

23

yep

yep

The real problem

is not that banks are investing money. That's how they pay everyone interest and don't charge to hold people's money. The problem is when these banks defraud their investors (stockholders) and their insurers (The American people through FDIC). Fraud is a crime, treat it as such.

Exactly. Banks have to make

Exactly. Banks have to make semi-risky investments and loans so they can make money in order to not have to charge people for holding money. The real issue is the fact that these large banks and financial institutions are able to borrow money at a next to 0% interest rate from the Federal Reserve and go make extremely risky investments and loans that they wouldn't normally make.

Why bring it back? I say we

Why bring it back?

I say we should REPEAL Glass-Steagall!

There is no perfect solution.

There is no perfect solution. A relatively unregulated system can be corrupted through greed. A regulated system breeds croony fascism and a false sense of security for the average Joe.

I do believe in some basic regulations, basically enforsing fraud laws much more than we do presently. I would also limit leveraging of banking insitutions.

Some here seem to take an anti-any regulation stand, when corporations through about the first century of our history had to prove their worth for the public good or have their charters revoked by the state they were chartered in. Delaware was the state that started to change the system, which is why you see a lot of corporations based there.

egapele's picture

Agreed, enforcing fraud laws

would put an end to much of the trouble. We would then have the problem of boughten judges.

it's a quandry

we run to the government asking them to enforce fraud laws... Corporations run to the government asking for special priveledges... It'd be fun to win a few of those battles, but the way things are currently run I doubt that'll happen.

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mindless side issue.

I like it just the way it is because it will all become transparent who caused the collapse. Right now the FED is giving free money to the top 5 investment houses. FOR FREE. Bring back Glass-Stegal and it all goes under the table and everybody would have plausible deniability.

I like it just the way it is. It helps people to actually see what is going on. The curtain has been pulled slightly aside.

The world is full of moral hazard

and YES Dr Paul voted against the repeal of Glass-Steagall.

http://www.youtube.com/watch?v=eIC8E9Q2pTs

The reason that Dr. Paul gave for being against Glass-Steagall

has nothing to do with the reason given on that petition you linked for being against Glass-Steagall. By the reasoning of whoever put together that petition, even if the Federal Reserve and FDIC didn't exist, that person or those people behind the petition would still support regulation of the free market. The only reason Ron Paul doesn't oppose Glass-Steagall is because the government did away with the regulations that would exist under a normally free market. It's like the analogy that I gave earlier. When the government depresses interest rates and raises taxes, thereby making it harder to save up for retirement, people are forced to accept the social security system as a necessary evil because the Keynesian ideologues in the government are making it extremely hard for them not to.

Social Security exists

Social Security exists because people DON't save for retirement. They didn't have the responsibility. That was why SS was mandated, to keep people out of the government's pockets (welfare).

Can you imagine if there was no Social Security, and no bailout in 2008? You'd have seniors out on the streets.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I think if we got rid of SS

I think if we got rid of SS and kept SS disability, then a lot of seniors would qualify. the others would have to take welfare or work.

and if we have to keep any public schools, seniors ought to be first in line all else equal for history teacher positions

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SS disability is welfare,

SS disability is welfare, no?

Remember, when SS was created, it was not seen as it was today. Living through the depression, where so many seniors whose retirement funds were wiped out and had to rely on government poorhouses (which is where the term comes) fromes pushed for a solution where seniors could take care of themsleves without having to rely on government aid..

No liberty-leaning person is comfortable with it. It rankles with the core of libertarian values (but fits in very well with the conservative ideology of personal responsibility).

Ultimately, if seniors cannot afford to retire, it hurts everybody. They have to take jobs that would go to the disabled or inexperienced. They inflate the supply of workers. They might have to live out on the streets. They can't afford hospital care and are dying out on the streets.

I guess you can just let them die. Of course, that causes public sentiment to plunge, hurts property values, etc. Panhandling, theivery, etc. all skyrocket. And of course, it is very uncomfortable. What inevitably happens is that government has to step in and take care of these people. That puts a financial burden on everyone. To escape that, forcing people to have safe savings like social security became popular.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

That's a very depression

That's a very depression view. Of course I see poor people on the streets today, and they're very older. That's WITH the current entitlements in place. So if you're precious big-government social security theft is the answer it's not working today. It's like "the night of the living homeless" out there sometimes.

Yeah to be honest I don't

Yeah to be honest I don't want Paul to become prez because I want every single last one of his policies to go through, but I know that won't be the case and he'll be a breath of fresh air.

However, those laboratories of democracy could be used to find a non-federal solution.

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egapele's picture

WOW, exactly what I think

He's the catalyst to the chemical reaction that would occur.

Only because Federal

Only because Federal Reserve's existence makes it necessary

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EXACTLY!!Without the Federal

EXACTLY!!

Without the Federal Reserve the Free Market would work, with it some regulation becomes required to rein in the cronyism...ARRRGGG!

END THE FED!

If my need to be RIGHT is greater than my desire for TRUTH, then I will not recognize it when it arrives ~ Libertybelle

What did I just read on the DP?

It looks like somebody needs to learn a little Austrian Economics.

Please take a couple of weeks to study this issue. Right here there are about a dozen free books that lay out the principles of Austrian Economics in a clear, concise manner:

http://www.tomwoods.com/learn-austrian-economics/

Installing the FDIC and then turning around and forbidding any interaction between commercial banking and investment banking is like installing social security and then suppressing interest rates to make sure people can't take the responsibility of saving up their own money for retirement so they will be forced to rely on the government for their livelihood in the future.

The Fed manipulating interest rates caused the business cycle.

When the Federal Reserve manipulates interest rates, keeping them artificially low, it promotes malivestment into areas of the economy where those resources are not actually needed.

These investments can't be sustained and they need to be liquidated, propping them up just makes the problem worse, because they are still unsustainable, there isn't an actual market demand for them.

The more malivestment, the worse the business cycle is going to be.
All stimulating them does, is postpone the correction a little longer, and misallocate even more resources, which will cause the eventual crash to be much worse.

If you want a healthy market, no amount of government regulation and intervention can achieve this, only the market can regulate itself, and only the market can set interest rates.

We need to get the Fed and the Feds out of the way, they are preventing the market from working.

Check out the Laissez-Faire Journal at LFJournal.com


"The State is a gang of thieves writ large." - Murray Rothbard

By that same logic, if the

By that same logic, if the government keep tax rates low, you stimulate malinvestment because you give the private sector more money to poorly invest with.

The thing is, the market is inherently prone to malinvestment, because humans are themselves prone to bad decisions. Government is not the solution - government cannot stop bad investments from being made. Sometimes, they can get lucky, but they can also get unlucky.

My overarching point is that the business cycle will always be there. Getting rid of all government influence won't change that.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a