- There are certainly better ways to deal with excessive risk-taking behaviour by banks, but we must not allow the perfect to become the enemy of the good. In the absence of these better mechanisms, it makes perfect economic sense to restrict commercial banks’ investments in very risky activities, because their deposits are insured.
- The second reason why Glass- Steagall won me over was its simplicity. The Glass-Steagall Act was just 37 pages long. The so-called Volcker rule has been transformed into 298 pages of mumbo jumbo, which will require armies of lawyers to interpret. [emphasis added]
The second reason seems more cogent than the first. I think the problem is corruption. Corruption requires deceit and deceit requires camouflage. The camouflage is the complexity quoted and emphasized above.
The first reason is good too, don't misunderstand. The first reason gets to the heart of the problem. If you are going to have highly leveraged system -which we have- you must insure its integrity. That's why Glass Steagall worked. It should be reinstated.
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