Oh, those generous bankers of the ‘20s and ‘30s. They wanted to do soooo much for their clients. Loans for shipping contracts of supplies to Europe to help clean things up after the, uh...you know. Big banking deal advice for when U.S. Railroad wanted to buy B&O or Short Line or Pennsylvania or Reading (pronounced “redding”).
Big banks and even bigger fat guy bankers were…everywhere. And somehow, they all looked like the Monopoly guy. And all was good and nice and clean fun for white men…until it wasn’t. Part of what was discovered in the ashes of the post-Great Depression recovery era was that everything was…linked.
Interlocking Directorates.
Banks in cahoots with companies seeking to virtually or directly monopolize industries. Politicians in the back pockets of hugely powerful and generally unregulated banks. And yeah, people had huuuge pockets back then. Think: kangaroos.
Anyway, one of the laws that came out of that era was the separation of commercial banking services (like the people who simply lend debt money to large corporations) and investment banking services, like...the people who advise and facilitate mergers, acquisitions, and other strategic dealmaking.
The belief, or hope, was that, by separating these two, um…over-loving kids in the playground…the insider dealing...and fair resource allocating...and honest dealings of big industry would somehow be more…fair. Or at least open.
So the intent of Glass Steagall was all about fairness. In particular, it focused on the separation of commercial and investment banking. So that was that. These two types of banking were separated...and then the financial markets after 1935 were all smooth sailing, right?
Um, yeah, not so much. Glass Steagall came under assault from many angles, the biggest of which was from the big banks’ lobbying efforts, as they sought to grow...and one way to do that would be to again combine commercial and investment banking services.
So the lobby, along with fortunate (or unfortunate) timing…worked. And in 1998 Bill Clinton said, “I did not have sexual relations with that woman.” And, uh...he also repealed Glass Steagall. Ironically, his exact words were, “It was no longer appropriate.” And he was referring to “the” Act…not the one with Monica.
Anyway, it went away, and from ‘98 forward for a decade, banks merged and got bigger and more powerful. And then they got more aggressive. Loaned more money under pressure from shareholders to keep growing and delivering such loving returns. And then along came the mortgage crisis, which almost brought down the western world in 2008-ish.
A lot of long-haired profs actually blamed the unwinding of Glass Steagall as a root cause for this cataclysmic fail. The phrase “too big to fail” was bandied about. But what the phrase really meant was "too big to be allowed to fail."
Don’t worry though. Because now, with the banking system nicely regulated, we should all be in for a comfy, smooth ride for the foreseeable future...
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Finance: What is the Glass Steagall Act?1 Views
Finance allah shmoop What is the glass steagall act All
those generous bankers of the twenties and thirties They wanted
to do so much for their clients Loans for shipping
contracts of supplies to europe you know to help clean
things up after the you know big banking deal advice
for when us railroad wanted to buy you know or
pennsylvania or reading big banks and even bigger you know
bankers like that guy were everywhere and somehow they all
looked like this guy Yeah and always good and nice
and clean fun for a white men Until it wasn't
part of what was discovered in the ashes of the
post great depression recovery era was that everything was linked
like interlocking directorates Banks in cahoots with companies seeking to
virtually or directly monopolising industries politicians in the back pockets
of hugely powerful and generally unregulated banks And yeah people
had huge pockets back then You know i think kinga
roots there were no income taxes So like what would
you expect anyway One of the laws that came out
of that era was the separation of commercial banking services
like the people who simply lend debt money Teo large
Corporations mostly and investment banking services like the people who
advise and facilitate mergers acquisitions and other strategic deal making
The belief or hope was that by separating these two
over loving kids in the playground well then the insider
dealing and fair resource allocating and honest well general dealings
of big industry would somehow be more fair or at
least open So the intent of glass steagall was all
about fairness In particular it focused on the separation of
commercial and investment banking So that was that these two
types of banking we're separated and then the financial markets
well after nineteen thirty five everything was smooth sailing right
Yeah not so much Glass steagall came under assault from
many angles the biggest of which was from the big
banks lobbying efforts as they sought to consolidate i by
each other and grow and well one way to do
that would be too again combine commercial and investment banking
services and they're kind of naturally a conflict there right
So the lobby along with fortunate or unfortunate timing worked
And in nineteen ninety eight bill clinton said i did
not have sexual relations with that woman and he also
repealed glass steagall Ironically his exact words on the repeal
were it was no longer appropriate Yeah and he was
referring to the act not the other act with monica
anyway it went away and from ninety eight forward for
a decade thanks merged and got bigger and more powerful
and then they got more aggressive loaned more money under
pressure from shareholders keep growing and delivering such loving returns
And then along came the home mortgage crisis which almost
brought down the western world in two thousand eight ish
A lot of long haired props actually blamed the unwinding
of glass steagall is a root cause for this cataclysmic
fail The phrased too big to fail was bandied about
needlessly really and well guess what the banking system was
not in fact too big to fail It almost did
But don't worry because now with the banking system nicely
regulated we should all be in for a comfy smooth
ride for the foreseeable future Next century or so everything's 00:03:23.58 --> [endTime] gonna be just fine
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