The portion of Glass-Stegall that was repealed in 1999 (signed by Clinton) separated bank holding companies from Investment Banks. The partial repeal of Glass-Stegall allowed commercial lenders to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations

And what became of the five pure Investment Banks that were in existence prior to 1999?

• 3/14/08 Bear Stearns is guided into a soft crash landing firesale to JPMorgan backstopped by the govt
• 9/14/08 Merrill Lynch is sold under duress to Bank of America
• 9/15/08 Lehman goes into Chapter 11 bankruptcy
• 9/22/08 Morgan Stanley & Goldman Sachs convert to bank holding companies

Did the repeal of Glass Stegall contribute significantly to the credit crisis? To make that case you have to argue that the capital that commercial banks such as Citicorp applied to the Investment Banking activities wouldn’t have flowed to those activities in spite of the large (short-sighted) profits that these activities reaped in the early 2000s.

I’m not buying that as a scape-goat. The true problem was that, aided by
artificially low interest rates and artificial, taxpayer backed guarantees provided by Fannie & Freddie, a housing bubble grew to where it had to pop. And when it popped, there the musical chairs game ended very badly.

Now, as to the reinstatement of the Investment Bank segregation provisions, now that’s another story. The reason Morgan Stanley & Goldman converted was to take advantage of the lower funding rates that a FDIC-insured institution can attract.

Am I for that access to lower funding backed by me? No. But not because it was a significant contributor to the credit crisis.

I like Ben Stein as a person — I think he’s very funny and he is (or used to be) conservative.

The things I’ve heard from him lately don’t make sense. I think the interview I saw was on Fox (perhaps it was Cavuto’s show), and Stein argued that the financial bill was a “no brainer” — a “must-be-passed-now.”

Stein didn’t seem to know exactly what was in Chris Dodd’s give-big-government-control-of just-about all-of-the-financial-indsutry bill.

Maybe Ben Stein needs more than a day off to read the thing and develop cogent thoughts.

of the FAILURE of regulation. Or at least the failure of regulators, so how is more regulation going to help?

It appears now that so many people do not remember the most important axiom of legal studies; “Hard cases make bad law”.

and reminds me in many ways about the discussion of TARP.

I am all for making improvements to financial regulations, but few if any of the proposed changes (or at least the changes being discussed) would seem to have anything to do with the crash of 2008.

In my view, the key is to regulate via predefined rules and processes, and to avoid regulatory discretion on the part of the regulators. Having a regulator determine whether or not an entity poses a systemic risk without providing any criteria for such a determination is an invitation to abuse, error, and subsequent regulation reform.

I mean .. is he dead yet?

Very disappointing. I enjoyed Expelled.

Sorry, but when I saw that everything I ever thought about Ben Stein was revised.

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