Glass-Steagall

[Nickman]

Should we reinstate and enforce Glass-Steagall? Senator Warren makes some very good points on this subject. Prior to the Glass-Steagall Act in 1933 the banks crashed about every 15 years on average. After the act passed, there were zero large crashes in large banks until the early 80s when we bagan to deregulate the banks. Anyone who is not familiar with the act, it keeps banks from investing and gambling in he market with depositors money. All the risk is on the depositors. You put in 20,000 in savings and the bank goes under....you are out of luck. Bill Clinton ended the last of Glass-Steagall before he left office, and in 2008 we saw the biggest crash since the depression.

Elizabeth Warren is trying to get these regulations back into the banks. Should we want Glass-Steagall to be reinstated? I think so. I'd like to hear your thoughts.

[nursebenjamin]

First of all, if people feel it's too risky to put their money into an checking/savings account then they don't have to do it. If things are as bad as you say then individuals will freely choose to stay away from banks. There doesn't have to be a government law.

First of all, people need a checking account in order to cash their paycheck and pay their bills. The only alternative is to use a check cashing places (which will take 3-5% of your check) and to buy money orders. This is what the repeal of Glass-Steagall is all about – it is another way to transfer money from the poor/working classes to the wealthy.

The average person doesn’t care about investing in the stock market (other than into their meager retirement account). They just want a local bank that will cash checks, insure their shabby savings against bank failure, and give them a mortgage loan.

Second of all, the only thing investment banks do is facilitate finances. You are not grasping this point. Investment banks are involved in things like corporate finance, insurance, etc. They don't lend out mortgages or loans for cars, etc. The only institution that lends out money is commercial banks. Therefore, separating commercial and investment banks will not achieve your desired goal.

Investment banks engage in securities-related activities (such as the selling of stocks and bonds). This is inherently a very risky business. Most or all commercial banks now have an investment banking arm or department which risks or endangers the deposits of customers. If the investment arm of a bank losses all its money in a risky bet, then, because of FDIC, taxpayers are forced to shoulder the cost of the risky bet.

There is nothing wrong with investment banks engaging in securities-related activities. But we should also have commercial banks that do not engage in this risky business at the taxpayers’ expense. Corporations need their investment banks, and the working classes need their commercial banks.

[WinePusher]

First of all, if people feel it's too risky to put their money into an checking/savings account then they don't have to do it. If things are as bad as you say then individuals will freely choose to stay away from banks. There doesn't have to be a government law.

First of all, people need a checking account in order to cash their paycheck and pay their bills. The only alternative is to use a check cashing places (which will take 3-5% of your check) and to buy money orders.

Ok fine, that's a good point.

This is what the repeal of Glass-Steagall is all about – it is another way to transfer money from the poor/working classes to the wealthy.

Uh no. Glass Steagall was repealed because it was a burden on our banking and financial services sector. It was worthless legislation wherein the costs greatly exceeded the benefits. Again, the only real thing Glass Steagall did was delineate between commercial and investment banks. There is no reason why banks cannot provide both commercial and investment services. There does not need to be any separation of the two.

The average person doesn’t care about investing in the stock market (other than into their meager retirement account). They just want a local bank that will cash checks, insure their shabby savings against bank failure, and give them a mortgage loan.

Right. But that's irrelevant. When Glass Steagall was repealed you didn't have banks taking consumer deposits and being 'investing them in the stock market.'

Second of all, the only thing investment banks do is facilitate finances. You are not grasping this point. Investment banks are involved in things like corporate finance, insurance, etc. They don't lend out mortgages or loans for cars, etc. The only institution that lends out money is commercial banks. Therefore, separating commercial and investment banks will not achieve your desired goal.

Investment banks engage in securities-related activities (such as the selling of stocks and bonds). This is inherently a very risky business. Most or all commercial banks now have an investment banking arm or department which risks or endangers the deposits of customers. If the investment arm of a bank losses all its money in a risky bet, then, because of FDIC, taxpayers are forced to shoulder the cost of the risky bet.

If a bank gambles and loses money out in the securities market they are the ones that suffer the loss. Banks have balance sheets just like any other business does. If they make stupid decisions then they lose profits, just like any other business. Your deposits, and mine, will always be there unless a freak of nature incident happens where everybody goes to the bank at once demanding all their cash.

Investment banks do not provide such services. They never had and never will.

They could. They already provide insurance. I am not advocating that we do away with loans here within commercial banks. Under GS commercial banks handle loans and we did fine. I am just providing an example of a banking system that has zero risk for depositors.

In order to have a banking system that has zero risk for depositors you have to do away with loans. That is the main problem with your idea. Honestly, the system works just fine as it does now. If you want to make the banking system better I suggest focusing on more important issues such as reforming the federal reserve, not minor things like Glass Steagall.

First of all, if people feel it's too risky to put their money into an checking/savings account then they don't have to do it. If things are as bad as you say then individuals will freely choose to stay away from banks. There doesn't have to be a government law.

We have to have people putting their money in banks for our economy to work. If no one used banks, our economy would be nonexistent.

Yes I agree. My mistake, nursebenjamin corrected me on it.

Second of all, the only thing investment banks do is facilitate finances. You are not grasping this point. Investment banks are involved in things like corporate finance, insurance, etc. They don't lend out mortgages or loans for cars, etc. The only institution that lends out money is commercial banks. Therefore, separating commercial and investment banks will not achieve your desired goal.

It will. My goal is not to get rid of loans and such. That part of our convo was a side note. That was if we made a completely new system to take out All risk. My main goal is to separate commercial banks from investment banks. You agree that GS separated these two systems, yes?

Yes, that is absolutely what Glass Steagall. What I am arguing is that this is not necessary and that Glass Steagall is a burden on the financial sector just like all other regulations are.

This tells us that if the two are not separate, banks can perform all actions of commercial and investment banking. What happens then to depositors money? Are they then not loaned, used for insurance, and invested in corporations at the will of the comm/invest bank?

Yea, they probably would be. But, banks are not stupid. They aren't going to make stupid/risky decisions unless some external force screws them up. Yes, banks obviously want to make as many loans and 'investments' as possible. But, they're obviously going to evaluate each case thoroughly to ensure that the people or businesses the loaning to will pay them back.

The FDIC screws this up because the insurance that the FDIC provides creates a moral hazard causing banks to behave irrationally. Your source attempted to address this problem but failed to mention any specifics.

Third of all, I'd like to say that I ignored JoeyKnothead and will not allow him to derail another perfectly good thread with his incomprehensible jargon. I also won't be disclosing any of my 'college documentation' to him because of his disturbing comments regarding incest. I understand that to somebody with an extremely limited education (the 8th grade) it must be shocking that to find out there are people who are driven and diligent enough to go to college

.

I like Joey and I don't think attacks of this nature are warranted regardless of what you think about him. His thoughts are just as legitimate as anyone else on this forum. You should take up your issues with him.

I don't care about him. But look at this thread. Has he actually addressed your topic at all? Nope. All he's done is flamebait. I'll never understand how this forum can tolerate that kind of behavior.

]And I'd like to apologize to Nickman for insulting his intelligence. His recent posts show that he understands the topic very well.

Well I appreciate the change in tone. All I want to do is debate and learn. I admire that you majored in Economics and I am sure I could learn quite a bit from you. I am a Supply/Logistics major, not quite the same thing. Lets try to keep it more civil. I will not make remarks such as NeoCon anymore.

Thank you very much Nickman, the feeling is mutual. Your posts have been very informative and although I still disagree with you on this, I'm beginning to appreciate your position and opinions.

[JoeyKnothead]

From Post 72:

On mean ol' JoeyKnothead...

...
I don't care about him. But look at this thread. Has he actually addressed your topic at all? Nope. All he's done is flamebait. I'll never understand how this forum can tolerate that kind of behavior.
...

Perhaps only to the pretend moderator pretending to moderate, or perhaps the Christian, could it ever be seen that asking one to show he speaks truth is "flamebait".

And don't it beat all, the pretend moderator is upset that my challenges to his claims, presented within the thread in which they were made - per previous, though now apparently defunct, moderator rulings - are suddenly "off topic".

We've seen this tactic time and time again, "any challenges to my claims are off-topic".

Such should lead us to the sound conclusion that the claimant himself considers his own comments "off-topic", but don't it beat all, it's the challenging of those "off-topic" claims he finds most upsetting.

I propose such a condition should be expected of the god concept, where one is happier'n all get out to make his claims, only he finds challenges to those claims so disturbing that he must attack his own assertions, by way of attacking challenges to those assertions. This is the kind of faulty reasoning that "supports" the god concept.

"I bravely make my claims!"

"But you can bet your last jug of whiskey I'll ignore anyone who challenges my claims, up to and including pointing out my own claims were 'off-topic'!" Of course, now that the mods have ruled we are not to challenge this claimant's claims, who knows what is and what ain't "on topic" anymore?


What is this kind of duplictous action - this accusing others of being "off-topic", of "flamebaiting", while one remains blissfully unaware that it's their claims that brought such challenges about?

I propose such a condition should lead us all to the sound conclusion that where one can't show he speaks truth, and where he prefers to hide his claims behind a firewall of moderator rulings (where there is no ruling that says he can't actually attempt to defend his claims), and where he accuses others, in his pretend moderator voice, of being in violation of forum rules, well then, they should not be trusted to have spoken the truth in the past, today, or at any time in the future.

Who enters debate, and gets all upset when it occurs?

How does that even work?

"Yes, that is my claim, but for sure don't challenge it, for that's just too danged upsettin'!"

And don't it beat all, the Christian is flummoxed as to why one would have the temerity to even ask if the Christian can utter him one ounce of truth.


We see how easily the god concept comforts the confounded, how easily it comforts those incapable of showing they speak truth. The god concept "hides" there, in the confounded mind, befuddled that folks don't believe those who refuse to show they speak truth, and they'll accuse you of all manner of nefarity just for asking if they can. The god concept hides there, in the confounded mind, protected by an outward refusal to even consider challenges that might threaten the god concept.

The god concept is just that - a comfort from the storm of unprovable, unverifiable, unknowable ideas. It sits there, a warm blanket on a cold winter's day, comforting those incapable of showing they speak truth, and unwilling to even give it a try.


Alas, it's far easier to ignore those who ask you to show you speak truth, than it is to strain the first finger in trying to show ya do.


But, and there's always a but, notice how the "ignorer" finds it so difficult to remain engaged in debate with someone else, when the mind knows that there, in the dark, in the silence, sits one who will not just let claims go passing by without challenge.

He must, he is compelled, he can do no other, than try to explain away what that "silent voice" is asking, where the confounded mind realizes that credibility might be important to the observers of these threads. In such a fashion then will he attempt to impugn that person's integrity, by passing himself of as a moderator, or otherwise accusing his challenger of nefarity.

I propose the confounded mind must produce something, anything in this condition, that would at least soothe the claimant's discomfort in knowing his claims were challenged, and where he realizes a simple presentation of data or retraction is so easy to offer. Alas, the god concept is not likely to allow this - owing to the god concept 'needing' to feel 'it' is correct. The god concept must feed 'it's own ego', so that the confounded may feel less so.

The god concept - always at the ready when truth ain't.

[Nickman]

If a bank gambles and loses money out in the securities market they are the ones that suffer the loss. Banks have balance sheets just like any other business does. If they make stupid decisions then they lose profits, just like any other business. Your deposits, and mine, will always be there unless a freak of nature incident happens where everybody goes to the bank at once demanding all their cash.

Tell that to the depositors in 1933.

In order to have a banking system that has zero risk for depositors you have to do away with loans. That is the main problem with your idea. Honestly, the system works just fine as it does now. If you want to make the banking system better I suggest focusing on more important issues such as reforming the federal reserve, not minor things like Glass Steagall.

I disagree that it works just fine. 2008 tells us that it doesn't work just fine. pre-1933 tells us it doesn't work just fine. We have consistent crashes every 12-15 years without GS. That is a fact.

n it.

Yes, that is absolutely what Glass Steagall. What I am arguing is that this is not necessary and that Glass Steagall is a burden on the financial sector just like all other regulations are.

Please provide one burden that GS causes on banks, and justification for why banks should be allowed to do what this burden disallows.

Yea, they probably would be. But, banks are not stupid. They aren't going to make stupid/risky decisions unless some external force screws them up. Yes, banks obviously want to make as many loans and 'investments' as possible. But, they're obviously going to evaluate each case thoroughly to ensure that the people or businesses the loaning to will pay them back.

But you now agree that they can. Before you were adamant that they couldn't even do these things. Banks are fallible and money is nothing to play around with. That is why GS should be in place to separate the commercial banks from the investment banks. This would take the possibility of banks making stupid risks completely out of the picture. I don't know about you but I want the people who handle my wealth to be regulated.

The FDIC screws this up because the insurance that the FDIC provides creates a moral hazard causing banks to behave irrationally. Your source attempted to address this problem but failed to mention any specifics.

I disagree, the ability for commercial banks to act as investment banks, without regulation, is what causes the irrational behavior. GS and FDIC together nip this problem in the bud. GS separates commercial banks and investment banks, and FDIC ensures depositors. Problemo solved for 50 years from 1933-1999. Problem came back after GS was deregulated. We can see a correlation and causation.

Thank you very much Nickman, the feeling is mutual. Your posts have been very informative and although I still disagree with you on this, I'm beginning to appreciate your position and opinions.

Thank you very much as well, WinePusher. I first thought your name was WinePunisher when I first became a member some years ago. "He must like wine," I thought.

[otseng]

...
I don't care about him. But look at this thread. Has he actually addressed your topic at all? Nope. All he's done is flamebait. I'll never understand how this forum can tolerate that kind of behavior.
...

Perhaps only to the pretend moderator pretending to moderate, or perhaps the Christian, could it ever be seen that asking one to show he speaks truth is "flamebait".

And don't it beat all, the pretend moderator is upset that my challenges to his claims, presented within the thread in which they were made - per previous, though now apparently defunct, moderator rulings - are suddenly "off topic".

Moderator Warning


Issuing a warning to the both of you. If either of you want to remain on this forum, you'll need to cease from making personal comments about each other.

Please review our Rules.

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