PRESS RELEASE
Hysteria Against Glass-Steagall Intensifies
April 26, 2017 (ERINS)—The barrage of attacks on the momentum for restoration of Glass-Steagall—especially against Trump administration figures Gary Cohn (chief economic advisor) and others who have reported that Trump is backing it—reached an hysterical level today in the Wall Street Journal. Former FDIC Chairman William Isaac and former CEO of Wells Fargo, Richard Kovacevich, co-authored an op-ed titled "The Shattered Arguments for a New Glass-Steagall." (This is a take-off on the infamous plaque on the wall of Sandy Weill’s office at Citigroup: The Shatterer of Glass Steagall.)
These obviously distraught bankers denounce Trump’s Chief Economic Advisor Gary Cohn for offering support for Glass-Steagall ("This is deeply disappointing"), then spin a yarn which is truly laughable:
"The 1999 repeal of Glass-Steagall was unfairly blamed in the aftermath of the 2008 financial crisis. Some people—apparently Mr. Cohn among them—mistakenly believe that investment banking is so risky that it should be once again kept separate from commercial banking. The truth is exactly the opposite: Traditional investment banking entails very little risk. The danger is stand-alone investment banks that are not diversified enough to survive a shock."
Ahh—"diversification" has made our banking system safe! Citigroup and Bank of America survived the 2008 crash, they say, because they were "diversified," while Bear Stearns, Lehman, and Merrill Lynch were not diversified banks with commercial deposits, that could loot their commercial deposits to pay for speculative losses, and get bailed out by the government! Now, they claim, we are safe:
"The financial system has stabilized at historically high capital levels, and the economy is growing again (albeit much too slowly). Today there are no major stand-alone investment banks engaged in high-risk trading for their own accounts."
But, they whine:
"Yet almost unbelievably, there are calls to restore Glass-Steagall, re-create stand-alone investment banks, and allow them to operate once again outside the regulated banking system."
Not mentioned, of course, is that the too-big-to-fail speculative institutions would not be bailed out under a new Glass-Steagall, nor is the fact that the banking insititutions could then begin investing in the real economy again, rather than speculation.
