Help me tease out a distinction about Glass-Steagall.

[FredStembottom]

Isn't "saving the banks" doomed from the start as long as commercial banks and investment houses continue to be allowed to combine (or, at least, each can do business as the other)?

As I understand it, Glass-Steagall separated the 2 types of "banking". The "Bailey Building and Loan" type of savings bank from the Wall street casino.

Wouldn't Step 1 of "saving the banks" be to separate the 2 types once again? Then do the manageable task of saving all the innocent savings, checking accounts and traditional loans of the commercial bank? You know, saving the millions of us who never agreed to enter the casino?

Then, let all the high risk investment games simply fail. Let those who took all the risk..... accept the risk?

I apologize for being fuzzy-headed in this post - but I am trying to clear up the fuzz. :hangover:

Ennaways, my main question is: Wouldn't the reinstatement of Glass-Steagall (the Banking Reform Act of 1933 part) be the natural first step?:shrug:

[Fresh_Start]

1. repeal of Glass Steagall did not eliminate safety and soundness

requirements.

Failure of regulation and oversight allowed safety and soundness to be ignored

[Captain Hilts]

2. Correct. The repeal, itself, wasn't, ultimately the problem. nt

[FredStembottom]

What form did those safety and soundness requirements take?

I haven't heard this before.

[Fresh_Start]

4. there are numerous aspects to safety and soundness

everything from how to determine credit quality to how you monitor the portfolio to securitization etc

http://www.occ.treas.gov/handbook/SS.HTM

[Fire1]

3. And this is where Gramm-Bliley comes in to play.

[FKA MNChimpH8R]

5. Glass Steagall required that normal commercial banking

functions (checking, consumer/business lending, et al) and investment banking, with its exotic instruments and high risks, could not be conducted by the same entity, IIRC. Gramm's pimping threw all of this out the window and let everyone gamble with other people's money in every market: commercial, investment, insurance, derivatives.

Reinstating Glass-Steagall is crucial to getting the banking system back on a sound footing