Warren: keeping Glass-Steagall would not have prevented the 2008 financial crisis

[Recursion]

http://dealbook.nytimes.com/2012/05/21/reinstating-an-old-rule-is-not-a-cure-for-crisis/

When I called Ms. Warren and pressed her about whether she thought the financial crisis or JPMorgan’s losses could have been avoided if Glass-Steagall were in place, she conceded: “The answer is probably ‘No’ to both.”

Still, she said that the repeal of the law “had a powerful impact to let the big get bigger.” She also contended that its repeal, brought about by the Gramm-Leach-Bliley Act, “mattered enormously. It is like holding up a sign to regulators to back up.”

...

The first domino to nearly topple over in the financial crisis was Bear Stearns, an investment bank that had nothing to do with commercial banking. Glass-Steagall would have been irrelevant. Then came Lehman Brothers; it too was an investment bank with no commercial banking business and therefore wouldn’t have been covered by Glass-Steagall either. After them, Merrill Lynch was next — and yep, it too was an investment bank that had nothing to do with Glass-Steagall.

Next in line was the American International Group, an insurance company that was also unrelated to Glass-Steagall. While we’re at it, we should probably throw in Fannie Mae and Freddie Mac, which similarly, had nothing to do with Glass-Steagall.

(He then goes on to list the commercial banks that failed, and Glass-Steagall would have been relevant to Citi Group, but not Wachovia or BofA.)

Glass-Steagall is a symbol. It was a decent law that should probably be re-instated. But it doesn't relate at all to the too-big-to-fail investment banks that caused such havoc 7 years ago, and its repeal was what allowed commercial banks to step in and stabilize the situation somewhat. So its impact was a mixed bag: Citi wouldn't have failed, but commercial banks couldn't have stepped in and propped up investment banks when they were failing. Which outcome would be worse? I'm not sure, and you aren't either, so the instant sneers of "corporate shill" that greet any attempt to look at the nuance of Glass-Steagall are that much more tiresome.

Like so many causes celebes here, there are better hills to die on.

[TM99]

1. I am sorry but this is not a nuanced view.

Would Glass-Steagall have been relevant to the investment banks collapse? No.

Would it have been relevant to the commercial banks? Yes.

Commercial banks propping up investment banks and the subsequent bail-out did not correct the problems. In fact, many argue that it will lead to future collapse. If a business is too big to fail, then yes, it has gotten too big. It has gone beyond what our regulated capitalist market considers legal, ethical, and viable.

Glass-Steagall is not a symbol. It is not a causes celebes. It is just another example of the continued deregulation of our financial institutions and corporations over the last 40 years by conservatives and neo-liberals alike. I will speak for myself when I say that I want Glass-Steagall reinstated as part of a comprehensive regulatory plan in the same way that I want TPP stopped, NAFTA re-worked, and a different set of rules put forth when it comes to world trade. I am not boxed in by the black and white thinking that all global trade is bad or that isolationism is good.

And yes, despite your desire for a high minimum wage, your over all viewpoint and posts suggest a definite New Dem neo-liberal political agenda.

[Recursion]

2. It would have been relevant to Citi, not BofA or Wachovia

Commercial banks propping up investment banks and the subsequent bail-out did not correct the problems. In fact, many argue that it will lead to future collapse.

It certainly corrected the problems at the time. It might lead to future collapse, which is one reason BofA had to unwind its Merril-Lynch holdings.

New Dem neo-liberal

"New Dem" and "neo-liberal" are two different things, and both are different from "third way". (I am something of a New Dem, I suppose, in that I think they are right about electoral strategy.) I'm mostly just sick of the kind of facile "politics by meme generation" I'm seeing so much of lately.

[TM99]

3. No.

New Dems are the Third Way/DLC. Neo-liberal economic policies, evolved liberal social policies, and decidedly neo-conservative foreign policies describes the New Dem political ideology, platform, and positions.

Bill Clinton, Hillary Clinton, and Barack Obama are New Dems.

[Recursion]

4. You're conflating four different things

I'm halfway one ("New Dem&quot of them as a tactical question ("it gets votes in Presidential years&quot .

When I came to DU a decade ago people addressed arguments, rather than attempting to pigeonhole posters...

[TM99]

5. It is also interesting to me

that New Dems are the most sensitive to the labels they themselves created.

Look, we use labels all the time. Neo-liberalism is a type of political economic philosophy. You know this. Yours posts are chock full of it. I challenge the neo-liberal interpretations of things like banking regulation and global trade with positions that are rooted in FDR New Deal & Keynesian political economic policies.

You are more concerned with party over principles. You are looking for a president who is just an administrator for the 'business' of governance. These are your stated positions.

You are very quick to tell DU'ers that we have cause celebes, that we are isolationists if we don't tow the party line on TPP, and the like if we are from a different political economic philosophy.

Remove the splinter from your eye before trying to remove it from others.

[Recursion]

6. Those are your caricatures of my positions, sure

Look, we use labels all the time

And we used to use them a lot less here, and the board was a much, much, much better place back then.

You are more concerned with party over principles

Nope. I said the party has to win for the principles to do anything to begin with.

You are looking for a president who is just an administrator for the 'business' of governance.

Nope. I said administration is the most important thing a President does. You added the "just", for reasons I can't imagine.

You are very quick to tell DU'ers that we have cause celebes

There is no way you can with any honesty deny that.

that we are isolationists if we don't tow the party line on TPP

Nope. Never said that, and I don't think it. Again, address what I say, not who you imagine I am. Also keep in mind I'm on the fence about the TPP because what I've seen so far is too much of a giveaway to American agriculture and software/media.

Neo-liberalism is a type of political economic philosophy.

Yup, and it's not mine. I'm a Keynesian interventionist, as even a cursory reading of my post history would show (I've had a dozen OPs advocating for a social dividend alone).

[TM99]

7. I am going by what you have written.

Even when corrected on such as thing as your NAFTA median income post, you just double down on its support. The same has been true for TPP where your posts do not suggest you are on the fence.

Your post on the President and policy has you stating -

99% of a President's work is either administrative or ceremonial.

If all the work of the job is ceremonial and administrative then yes, my statement is factually correct.

Look, I am not going to get into a pissing contest with you. I will challenge your economic philosophy, your politics, and your posts.

This OP is hardly a factual smorgasbord. It is an opinion piece.