NPR logo Can We Blame Or Praise Glass-Steagall?

Can We Blame Or Praise Glass-Steagall?

My story on All Things Considered tonight will cover the impact of that depression-era banking law, Glass-Steagall.

Every economist I've spoken with says, simply, that it was a bad law but that it and its repeal are not really to blame for what is happening now.

I found this PDF paper by former IMF chief economist Raghuram G. Rajan and current Fed governor Randy Kroszner dense but helpful.

It explains why the Glass-Steagall Act was a response to a problem that didn't exist.

Comments

 

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Perhaps Rajan's analysis is a bit too narrowly drawn. He's defined the problem away by ignoring the dislocation removing Glass-Steagall caused in the real environment. ("Amid Turmoil, SEC's role scrutinized")

Jack Coffee, who was interviewed on ATC the very day your story ran, certainly thinks differently than Rajan... and that repealing Glass-Steagall overstressed the entire investment banking industry.

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Sent by Robert | 9:04 PM | 9-19-2008

I think the piece proves that we rely too much on the academic mutterings of economists in the current crisis. Thus far economists, almost as a group, have been wrong in all their prognostications about the economy. Why do we continue to consult them? Yes, the question was too narrowly drawn. The repeal of Glass-Steagall was a disaster and the Democrats are complicit. Bob Rubin, one of the chief engineers of the repeal, is now at the right hand of Obama. What does that say about the future of the American financial system?

Sent by Moso | 5:20 PM | 9-20-2008

Geez, what a whitewash. It was Gramm bill in 1999, not Glass-Steagell mainly (though Glass-Steagell opened the doors). Your incompentence on the history is mind-boggling

Sent by Dave Rathke | 3:23 PM | 9-21-2008