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January 22, 2010

Volcker In The House - Putting the Glass Back in The Steagall

And now for a little good news … and Lord knows we need a little good news. Because amid the clatter and the bang of manly nekkid conservatives winning Ted Kennedy's seat in Massachusetts and the worst Supreme Court decision since the one that allowed a certain faux Texan to saunter into the People's House comes this little shaft of sunlight … from Shahien Nasiripour of the HuffPo:

In his remarks Thursday, Obama laid out a proposal to require banks and the companies that own them to divest from any hedge funds or private-equity firms they own, invest in or sponsor. He also called for a cap on a firm's liabilities relative to market share, so a small group of banks won't be able to hold an inordinate amount of control over the financial system. And he would require banks and their parent companies to halt all Wall Street-like trading they do strictly for their own profit. If the banks don't want to quit those businesses, then they can no longer be banks.

Emphasis mine. This amounts to at least a partial revival of the Glass-Steagall Act, which drew a hard line between commercial banks and investment banks and, which once that barrier was pushed down, laid the groundwork for the housing bubble - which is still collapsing.

What we need is, of course, full reinstatement of Glass-Steagall. But this is so far and above what was being done it might turn out to be a strong upside – and with Paul Volcker at last being listened to and Geithner going along because he's enjoying that gig too much, it can't help but be a Good Thing.

Posted by The Chinuk at January 22, 2010 09:13 AM