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No Going Back: Why We Cannot Restore Glass-Steagall's Segregation of Banking and Finance

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  • Jan Kregel

Abstract

The purpose of the 1933 Banking Act--aka Glass-Steagall--was to prevent the exposure of commercial banks to the risks of investment banking and to ensure stability of the financial system. A proposed solution to the current financial crisis is to return to the basic tenets of this New Deal legislation. Senior Scholar Jan Kregel provides an in-depth account of the Act, including the premises leading up to its adoption, its influence on the design of the financial system, and the subsequent collapse of the Act's restrictions on securities trading (deregulation). He concludes that a return to the Act's simple structure and strict segregation between (regulated) commercial and (unregulated) investment banking is unwarranted in light of ongoing questions about the commercial banks' ability to compete with other financial institutions. Moreover, fundamental reform--the conflicting relationship between state and national charters and regulation--was bypassed by the Act.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Public Policy Brief Archive with number ppb_107.

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Date of creation: Jan 2010
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Handle: RePEc:lev:levppb:ppb_107

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Web page: http://www.levyinstitute.org

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Cited by:
  1. Mario Tonveronachi, 2010. "Financial innovation and system design," PSL Quarterly Review, Economia civile, vol. 63(253), pages 131-144.
  2. L. Randall Wray, 2011. "Minsky's Money Manager Capitalism and the Global Financial Crisis," Economics Working Paper Archive wp_661, Levy Economics Institute.
  3. Valeriu IOAN-FRANC & Napoleon POP, 2012. "A New International Economic Order. Challenges For Future Theoretical And Practical Debates," Romanian Journal of Economics, Institute of National Economy, vol. 35(2(44)), pages 218-226, December.
  4. Karanassou, Marika & Sala, Hector, 2010. "The US inflation-unemployment trade-off revisited: New evidence for policy-making," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 758-777, November.
  5. Palan, R. & Nesvetailova, A., 2013. "The Governance of the Black Holes of the World Economy: Shadow Banking and Offshore Finance," CITYPERC Working Paper Series 2013-03, Department of International Politics, City University London.
  6. Tropeano, D., 2013. "Financial Fragility in the Current European crisis," CITYPERC Working Paper Series 2013-09, Department of International Politics, City University London.
  7. Dimitri B. Papadimitriou & Greg Hannsgen & Gennaro Zezza, 2012. "Back to Business as Usual? Or a Fiscal Boost?," Economics Strategic Analysis Archive sa_apr_12, Levy Economics Institute.
  8. repec:psl:pslqrr:2010:7 is not listed on IDEAS

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