Friday, September 19, 2008
Exonerating the repeal of Glass-Steagall
I have been arguing all week with people who are smarter than me that the repeal of Glass-Steagall in 1999 was not the cause of the current crisis in the financial system. It is therefore with transporting delight, bordering on glee, that I pass along this post of Megan McArdle, who usefully concludes:
If Glass-Steagall's repeal had meaningfully contributed to this crisis, we should see the failures concentrated among megabanks where speculation put deposits at risk. Instead we see the exact opposite: the failures are among either commercial banks with no significant investment arm (Washington Mutual, Countrywide), or standalone investment banks. It is the diversified financial institutions that are riding to the rescue.
As always, she is more learned and eloquent than me. Read the whole thing.
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