Hello,
As most people know in 1929 there was a huge market crash followed by a severe depression.
In the course of that depression there were, among other things, 'runs' on banks. In 1933 the
Glass/Steagall Act was passed. The idea of the act was to create a separation of the financial
industry with the idea of preventing a series of events in distinct arenas causing a simultaneous
cascade in the equities markets and a collapse of the banks exemplified by 'runs' on those institutions.
Since 1933 millions of dollars have been spent lobbying Congress to repeal the Glass/Steagall Act
in favor of a replacement. If the Act isn't repealed in intent, what has taken its place has loopholes
big enough to drive a truck through. The 1929 conditions the Act was created to prevent from ever
happening again have been effectively restored.
Am I suggesting we're due for a 1929 style general economic collapse? No, I'm merely pointing out
that the protections designed to prevent a recurrence have been systematically stripped away.
For a detailed look at its characterization as an archaic act and eventual dismemberment
see http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html .
PBS presented the hyperlinked information in 2003. The final paragraph is especially notable with respect
to recent developments at Citibank. The role of the Fed is notable throughout and presents a seemingly
contrary image to its current depiction as savior.
Cheers,
Darrin