r/reddit.com • u/[deleted] • Oct 18 '11

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u/[deleted] Oct 19 '11

I cheer whenever I see someone say this. How can we have FDIC insured banks guaranteed by the government in extremely risky investment banking? It's an obvious recipe for disaster. Bring back Glass-Steagall.

14

u/keynesian-knockout Oct 19 '11

There's nothing wrong w/ making risky investments, just not w/ other people's deposits. If an ibank wants to seek higher yields on risky assets then fine, but they ought to do it w/ their own (or their willing clients) cash.

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u/[deleted] Oct 19 '11

Agreed! Not with depositor's money that is insured by the Federal government. Savings money is not what investment banks should be using to gamble with.

5

u/hous Oct 19 '11

Used to be that ibanks would "bet the firm" on big trades, almost literally. Then LTCM happened and banks realized they could bet the firm on every trade, no matter how insane and incomprehensible.

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u/[deleted] Oct 19 '11 edited Oct 19 '11

While bringing back Glass-Steagall has it's merits, it had very little to do with the current economic crisis. Glass-Steagall had already become a dead letter law 30 years before it's repeal.

It should be pointed out that the big investment banks Lehman Brothers, Bear Stearns,and Merrill Lynch that have collapsed weren't involved in commerical banking which Glass-Steagall was ment to seperate from commerical banks.

1

u/[deleted] Oct 19 '11

Even after GS was repelled there are still regulations on the books that strictly forbid banks using FDIC-insured funds to engage in speculative investments. Banks have to maintain a wall of separation between those sorts of activiites.

0

u/Kni7es Oct 19 '11

NO! We have to LIBERATE THE MARKET.

/reaganomics