Salient to Investors:

Matthew C. Klein writes:

  • Glass-Steagall 2 would do nothing to protect us from the devastation we recently experienced.
  • The belief that the 1933 Glass-Steagal Act made the financial system safe and promoted decades of prosperity and that the 2007 crisis would never have happened if G-S had remained intact is a myth.
  • Iceland, Ireland and Spain all generated devastating debt bubbles without derivatives or complex securities. Countrywide, Washington Mutual, Wachovia and Indymac failed because they had made bad bets on mortgages amid a housing bubble.
  • Elizabeth Warren said last year that the financial crisis would not have been prevented by Glass-Steagall, but said the 1999 repeal sent a signal to companies and regulators that the financial industry could do whatever it wanted.
  • A better solution would be to raise equity capital requirements, protect consumers from products designed to take advantage of them, and separate money creation from lending.

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