May 19, 2010
PARALLEL UNIVERSE: My Campaign to Bring Back Glass-Steagall Gets Support from Prominent Economist Nouriel 'Dr. Doom' Roubini
By David M. Kinchen
Huntingtonnews.net Editor
I've made no secret of my wish to see the reinstatement of the 1933 Glass-Steagall Act that was sadly dismantled in 1999 in the Clinton Administration. My argument for bringing back Glass-Steagall was voiced in my book review of "Complicit" by Mark Gilbert, who said the repeal of the legislation which separated commercial banking from much more speculative "investment" banking contributed to the meltdown.
Here is a link to the review: http://archives.huntingtonnews.net/columns/100210-kinchen-columnsbookreview.html
Just about the only part of G-S that was retained was the Federal Deposit Insurance Corp., which insures bank accounts. Even the fanatics in the White House and Congress couldn't do away with the FDIC!
Nouriel Roubini, professor of economics at New York University's Stern School of Business, was dubbed "Dr. Doom" a few years ago for predicting an economic collapse. Nobody is calling the author of the new book "Crisis Economics" Dr. Doom these days. In a story I found on AlterNet (link: http://www.alternet.org/story/146900 nouriel_roubini%3A_how_to_break_up_the_banks%2C_stop_massive_bonuses%2C_and_reign_in_wall_street_greed) Roubini, who was born of Iranian Jewish parents in Istanbul, Turkey in 1959 and is an American citizen, called for the rejection of the Volcker Rule, which he calls "Glass-Steagall-Lite" and reinstatement of the original Glass-Steagall: "We need to go all the way and implement the kind of restrictions between commercial banking and investment banking that existed under Glass-Steagall," he told AlterNet economics editor Zach Carter.
Economies of scale produced "disasters" like Goldman Sachs and Morgan Stanley, he said, saying that "the model of the financial supermarket where within one institution you have commercial banking, investment banking, underwriting of securities, market-making and dealing, proprietary trading, hedge fund activity, private equity activity, asset management, insurance — this model has been a disaster. The institution becomes too big to fail and too big to manage."
Roubini said in the AlterNet interview that "There are no benefits from these economies of scale and scope, as we've seen from the disasters at Citigroup, AIG and others. And there are massive conflicts of interest. So I would separate all of these financial businesses under separate institutions, and I would go back to the kind of restrictions that we had under Glass-Steagall."
Plugging his new book, co-authored with Stephem Mihm, Roublini was interviewed last week by Renee Montagne of National Public Radio (link: http://www.npr.org/templates/story/story.php?storyId=126720034&ft=1&f=3).
Roubini told the NPR audience that the U.S. economic recovery, such as it is, "is going to anemic, sub-par, below trend for the next couple of years for two reasons: First of all, you have over-leveraged U.S. consumers that over time have to start consuming at the rate slower than their income in order to save more. Secondly, like in Europe right now, we have very large budget deficits in the United States."
He added that the economic recovery is "better than having a recession, but unless we tackle our own fiscal deficits, unless we also better supervise banks and other financial institution, we could be planting the seeds of the next financial crisis down the line."
Share This Story:
Make HNN Your Homepage (IE Users Only)
PARALLEL UNIVERSE: My Campaign to Bring Back Glass-Steagall Gets Support from Prominent Economist Nouriel 'Dr. Doom' Roubini
By David M. Kinchen
Huntingtonnews.net Editor
I've made no secret of my wish to see the reinstatement of the 1933 Glass-Steagall Act that was sadly dismantled in 1999 in the Clinton Administration. My argument for bringing back Glass-Steagall was voiced in my book review of "Complicit" by Mark Gilbert, who said the repeal of the legislation which separated commercial banking from much more speculative "investment" banking contributed to the meltdown.
Here is a link to the review: http://archives.huntingtonnews.net/columns/100210-kinchen-columnsbookreview.html
Just about the only part of G-S that was retained was the Federal Deposit Insurance Corp., which insures bank accounts. Even the fanatics in the White House and Congress couldn't do away with the FDIC!
Nouriel Roubini, professor of economics at New York University's Stern School of Business, was dubbed "Dr. Doom" a few years ago for predicting an economic collapse. Nobody is calling the author of the new book "Crisis Economics" Dr. Doom these days. In a story I found on AlterNet (link: http://www.alternet.org/story/146900 nouriel_roubini%3A_how_to_break_up_the_banks%2C_stop_massive_bonuses%2C_and_reign_in_wall_street_greed) Roubini, who was born of Iranian Jewish parents in Istanbul, Turkey in 1959 and is an American citizen, called for the rejection of the Volcker Rule, which he calls "Glass-Steagall-Lite" and reinstatement of the original Glass-Steagall: "We need to go all the way and implement the kind of restrictions between commercial banking and investment banking that existed under Glass-Steagall," he told AlterNet economics editor Zach Carter.
Economies of scale produced "disasters" like Goldman Sachs and Morgan Stanley, he said, saying that "the model of the financial supermarket where within one institution you have commercial banking, investment banking, underwriting of securities, market-making and dealing, proprietary trading, hedge fund activity, private equity activity, asset management, insurance — this model has been a disaster. The institution becomes too big to fail and too big to manage."
Roubini said in the AlterNet interview that "There are no benefits from these economies of scale and scope, as we've seen from the disasters at Citigroup, AIG and others. And there are massive conflicts of interest. So I would separate all of these financial businesses under separate institutions, and I would go back to the kind of restrictions that we had under Glass-Steagall."
Plugging his new book, co-authored with Stephem Mihm, Roublini was interviewed last week by Renee Montagne of National Public Radio (link: http://www.npr.org/templates/story/story.php?storyId=126720034&ft=1&f=3).
Roubini told the NPR audience that the U.S. economic recovery, such as it is, "is going to anemic, sub-par, below trend for the next couple of years for two reasons: First of all, you have over-leveraged U.S. consumers that over time have to start consuming at the rate slower than their income in order to save more. Secondly, like in Europe right now, we have very large budget deficits in the United States."
He added that the economic recovery is "better than having a recession, but unless we tackle our own fiscal deficits, unless we also better supervise banks and other financial institution, we could be planting the seeds of the next financial crisis down the line."
Share This Story:
Make HNN Your Homepage (IE Users Only)
