I’ve posted about this before, but I’m still wondering why the reenactment of Glass-Steagall is not a good (and pretty obvious) part of the solution to our financial woes. The legislation worked quite well for more than sixty years and would be easy for banks to understand and apply.
So what are the counterarguments? One might be that Glass-Steagall is dated, therefore you can’t just bring it back jot-for-jot. I’m happy to concede that point, though you would think that some modest revisions could take care of that problem. A second thought is that the repeal of Glass-Steagall did not cause the Panic of 2008, so a restoration won’t do much good. Even if that is true, I don’t see what harm would come from bringing back the old regulatory framework. (Can that approach really be worse than what we have now?) The third possibility is that there was something wrong with Glass-Steagall that I don’t know about. I’d be interested in hearing from people who know more about financial regulation than I do.