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Lets review the Glass-Steagall Act

 
Omega
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User ID: 320082
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11/16/2007 12:02 AM
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Lets review the Glass-Steagall Act
That was repealed under the Clinton administration. IMO most apropos in these....interesting times.

Those that refuse to remember history are destined to repeat it-as we are now.

[link to www.cftech.com]

Introduction to the Glass-Steagall Act

The Glass-Steagall Act has remained one of the pillars of banking law since its passage in 1933 by erecting a wall between commercial banking and investment banking. In effect, the law keeps banks from doing business on Wall Street, and vice versa. In actuality, there are two Glass Steagall measures. The first was the Glass-Steagall Act of 1932, a bookkeeping provision that allowed the Treasury to balance its account. And what is commonly known today as the Glass-Steagall law is actually the Bank Act of 1933, containing the provision erecting a wall between the banking and securities businesses. It also laid the groundwork for legislation that would allow the Federal Reserve to let banks into the securities business in a limited way.


Causes For and Brief History of Glass-Steagall Act [Return to Top]

Fundamental to an understanding of the passage of the Glass-Steagall Act is the fact that by 1933 the U.S. was in one of the worst depressions of its history. A quarter of the formerly working population was unemployed. The nation's banking system was chaotic. Over 11,000 banks had failed or had to merge, reducing the number by 40 per cent, from 25,000 to 14,000. The governors of several states had closed their states' banks and in March President Roosevelt closed all the banks in the country. Congressional hearings conducted in early 1933 seemed to show that the presumed leaders of American enterprise -- the bankers and brokers -- were guilty of disreputable and seemingly dishonest dealings and gross misuses of the public's trust. Looking back, some historians have come to a different conclusion about the role such abuses played in bringing down banks. Some historians now say the chief culprit of bank failures was the Depression itself, which caused real estate and other values to fall, undermining bank loans. Securities abuses played a minimal role in the collapse of banks, these historians say, and caused few failures among the New York banks with the largest Wall Street operations.

Last Edited by Account Deleted by User on 12/26/2011 12:47 AM
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Anonymous Coward
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United States
11/16/2007 05:36 AM
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Re: Lets review the Glass-Steagall Act
bump
ASYLUM100

User ID: 325759
United Kingdom
11/16/2007 05:45 AM
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Re: Lets review the Glass-Steagall Act
LOL thought it said Glass seagull, thought whats that and it would sink.
WHAT IS FAITH THEN BUT PERSISTANT HOPE IN THE FACE OF RELENTLESS DOUBT
Anonymous Coward
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Australia
11/16/2007 05:47 AM
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Re: Lets review the Glass-Steagall Act
yawn
Anonymous Coward
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Australia
09/30/2008 11:19 PM
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Re: Lets review the Glass-Steagall Act
yawn
 Quoting: Anonymous Coward 321976



Harden the fuck up! IDIOT.
Anonymous Coward
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Australia
09/30/2008 11:31 PM
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Re: Lets review the Glass-Steagall Act
OP has nailed it.

"Those that refuse to remember history are destined to repeat it-as we are now."

Solutions to this banking mess are sorely lacking in discussion at the moment.

Wachovia is gone?
FDIC Has Near-Death Experience Over Wachovia
[link to larouchepac.com]

Easier read.

To Save Wachovia, Restore Glass-Steagall

September 27, 2008 (LPAC)--The failure of Washington Mutual two days ago brought to 13 the number of U.S. banks to fail this year, and the pace is accelerating. The recent demands of President George Bush and Treasury Secretary Henry Paulson for an unprecedented bailout of the banking system to avoid a meltdown represent an admission that, just as Lyndon LaRouche said, the banking system is bankrupt. More failures are coming, at a pace which will take your breath away.

Many eyes have now turned to Wachovia Corp., the giant North Carolina-based bank holding company, as the next big bank to fail, and Wachovia is widely reported to be in "fire sale" talks with Citigroup, Wells Fargo and Spain's Banco Santander. Such a merger may occur, or the buyers may wait, as J.P. Morgan Chase did with Washington Mutual, and buy the bank from the FDIC after it is closed. However it occurs, it is likely that Wachovia will soon cease to exist as an independent bank.

One of the guiding principles behind LaRouche's Homeowners and Bank Protection Act is that, as properly regulated banking is an essential aspect of any economy, we must save the state- and Federally chartered commercial banks and thrifts. That means two things: First, we must extract the relevant banking functions from banks which have often become virtual casinos of speculative bets, and second, we must restore the modern regulatory regime established by FDR, beginning with the restoration of Glass-Steagall.

The Glass-Steagall Act of 1933 was one of the most important banking regulations ever passed, as it prohibited any commercial bank from engaging in investment banking activities. As FDR told the House of Morgan, you can be a commercial bank or an investment bank, but you can't be both. This was done to prevent a raft of abuses which occurred in the 1920s and early 1930s, as the bankers saved themselves at the expense of their customers and the public. Glass-Steagall forced the House of Morgan to split into two separate institutions, an act for which FDR has never been forgiven, but FDR was entirely correct, as recent events have demonstrated. The banks began to chip away at Glass-Steagall in the 1980s, and it was finally repealed in 1999, after the illegal merger of Travelers and Citicorp to form Citigroup in 1998. The repeal of Glass-Steagall opened the floodgates as the banks expanded their speculative activities, until the distinctions between commercial banking and investment banking have virtually disappeared. As has the solvency of the system.

Retrieving the commercial banking functions out of some of these abominations will require delicate surgery, akin to removing deeply embedded tumors. This is the case with Wachovia Corp., where the commercial bank, Wachovia Bank, N.A., is the largest among hundreds of subsidiaries. Wachovia Bank, however, is a toxic waste dump, holding among other nasties, $4.4 trillion in notional value of derivatives, or $6.63 in derivatives for every dollar of assets. That means that saving the entire bank, much less its parent holding company, is not only undesirable but impossible. What can be saved, however, are the deposits first and foremost, and the loans and leases related to traditional banking activities; what will be let go, are the derivatives and other speculative activities. The holding company and all its subsidiaries should be seized by Federal banking regulators, and put into receivership. The necessary commercial banking activities would be reorganized into a new institution, while the rest would be frozen and dealt with later.

This approach of stripping out all the speculation and leaving a clean bank, accompanied by strict new banking regulations, would allow households and businesses to have unfettered access to their money and to necessary credit, while removing the burden imposed by the mountain of speculative bets, fictitious capital and other nonsense.

In the next couple of weeks, between Oct. 1 and Oct. 15, we will very likely see the complete collapse of the U.S. banking system. Should the Bush/Paulson bailout package be passed, it would immediately trigger a Weimar Germany-style hyperinflationary explosion, destroying the value of the dollar, and with it the economy. Should the bailout be rejected, the British banking system will collapse immediately, with the U.S. banks collapsing on its heels. With or without the bailout, we face the disintegration of the banking system, thanks in large part to deregulation and globalization.

LaRouche's HBPA is the only effective way of preventing the collapse of the financial bubble from taking the economy down with it. It is a dramatic measure, but far preferable to the absolute chaos and destruction which will ensue without it. Without it, the nation is lost.

[link to larouchepac.com]
Anonymous Coward
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United States
10/01/2008 10:49 AM
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Re: Lets review the Glass-Steagall Act
Fact: though the repeal happened during Clintons term it was Republicans who voted for it.

Since this was a Republican-controlled Congress (ONE Democrat voted in favor of the repeal), we can be sure the bulk of those contributions went to the ranking Republicans on those committees. Also, please note this was post-impeachment: Clinton was horse-trading with Republicans to get at least some of his agenda passed so that hed have some legacy other than Monica.

But what will happen now is that Republicans will very effectively blame this whole mess on Clinton and the Democratic party
Anonymous Coward
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10/01/2008 10:51 AM
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Re: Lets review the Glass-Steagall Act
To be fair I blame them all. I think both sides created this mess.





GLP