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Could the 1933 Glass-Steagall Act have prevented the financial crisis?

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  • Maxime Delabarre

    (Sciences Po - Sciences Po)

Abstract

This paper explores the common argument according to which the repeal of the Glass-Steagall Act was at the origin of the 2008 financial crisis. By arguing successively that the Act would not have covered the failing banks and that it would not have solved the "Too-big-to-fail" problem, this paper concludes by the negative. Had the Glass-Steagall act still been in place, the Global Financial crisis would not have been prevented. Mortgage policies, low capital requirements and Basel II seem to be more convincing alternatives.

Suggested Citation

  • Maxime Delabarre, 2020. "Could the 1933 Glass-Steagall Act have prevented the financial crisis?," Working Papers hal-03014511, HAL.
    • Handle: RePEc:hal:wpaper:hal-03014511
    Note: View the original document on HAL open archive server: https://hal.science/hal-03014511
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    References listed on IDEAS

    as
    1. Ramírez, Carlos D., 1999. "Did Glass-Steagall Increase the Cost of External Finance for Corporate Investment?: Evidence From Bank and Insurance Company Affiliations," The Journal of Economic History, Cambridge University Press, vol. 59(2), pages 372-396, June.
    2. Charles W. Calomiris & Stephen H. Haber, 2015. "Fragile by Design: The Political Origins of Banking Crises and Scarce Credit," Economics Books, Princeton University Press, edition 1, number 10177-2.
    3. repec:aei:rpaper:26094 is not listed on IDEAS
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    5. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    6. Ramirez, Carlos D, 1995. "Did J. P. Morgan's Men Add Liquidity? Corporate Investment, Cash Flow, and Financial Structure at the Turn of the Twentieth Century," Journal of Finance, American Finance Association, vol. 50(2), pages 661-678, June.
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    8. Darrell Duffie, 2019. "Prone to Fail: The Pre-crisis Financial System," Journal of Economic Perspectives, American Economic Association, vol. 33(1), pages 81-106, Winter.
    9. Kroszner, Randall S & Rajan, Raghuram G, 1994. "Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking before 1933," American Economic Review, American Economic Association, vol. 84(4), pages 810-832, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial regulation; Glass-Steagall; Act Financial crisis; Financial conglomerates; Universal banking; Financial sector reform; Financial architecture; Financial stability;
    All these keywords.

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