Don’t Bring Back Glass-Steagall

My latest article for the American Institute for Economic Research is "Don't Bring Back Glass-Steagall."

Op-Ed: JPMorgan Lesson: End Government Bank Guarantees

It’s widely believed that JPMorgan Chase’s recent $2 billion–plus loss proves we need the comprehensive banking regulation called for by the 2010 Dodd-Frank law.

That belief is wrong.

Read the rest of the op-ed here.

Credit-Card Deform

Beware the unintended consequences of the "Credit Card Holders' Bill of Rights," which could pass the House this week. Even assuming the best of intentions, the proposed restrictions (like usury laws) would make it harder for lower-income people or those with weak credit records to use credit cards. This wouldn't reduce their debt; it would only encourage a switch to inferior forms of debt. I hate defending the banks since they are not free-market firms but rather part of a state-banking cartel. But this is no way to address whatever credit-card problems exist. Even in the current context, banks compete for credit-card customers, and people shop around aggressively. (I've transferred balances at zero-interest often in the past.) The alleged obligations attached to TARP money are irrelevant if the new regulations would harm people.

Appearance on Arkansas Public TV

I appeared on AETN's Unconventional Wisdom, hosted by David Sanders, on March 27, 2009. The topic of discussion was the banking crisis.

That's Politics for You

I found this interesting tidbit in Wikipedia's entry on the Gramm-Leach-Bliley Act:

Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act...

G-L-B, the last significant bank deregulation that occurred in the U.S., repealed the part of the New Deal's Glass-Steagall Act that forbade a single institution from engaging in both commercial and investment banking. G-L-B was passed by the Republican-controlled Congress in 1999 and signed by Democratic President Clinton. His treasury secretary at the time was Larry Summers, now President Obama's top economic adviser. It's important to remember this when people say that banking deregulation during the Bush years created the economic mess. The Bush administration didn't deregulate anything of importance. G-L-B in no way contributed to the financial turmoil.

What's important about the quote is that it shows that the Republicans acquiesced in the strengthening of the Community Reinvestment Act, which is partially at fault for the mortgage meltdown. This is the law that compelled banks to increase their mortgage lending to people with low incomes and poor credit histories.

As we've long noted, both parties are guilty of creating the house of cards that has fallen.

Cross-posted at Anything Peaceful.