Comment by jellicle | Hacker News Reader

Comment by jellicle | Hacker News Reader

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There's always someone who speaks at great length about finance while being clueless about the subject.

>(and none of the large merged banks failed while several large banks with only commercial or only investment banking operations did fail)

They didn't fail because the government bailed them out. The government bailed them out because the disruption to society caused by large COMMERCIAL banks failing was intolerable. They needed to be bailed out because they took great risks on the INVESTMENT side. This merger of the investment and commercial side was prohibited by Glass-Steagall. Which brings us around to our initial point: the financial crisis was substantially exacerbated by the repeal of parts of the Glass-Steagall Act, which allowed the risk-taking of the investment banks to imperil commercial banking.

And no, Glass-Steagall doesn't have anything to do with offering interest on checking accounts.

"There's always someone who speaks at great length about finance while being clueless about the subject. [...] And no, Glass-Steagall doesn't have anything to do with offering interest on checking accounts."

snicker Try section 11(b), which was implemented as the infamous "Regulation Q". Normally I'd refrain from mocking someone for an innocent error on a side point, but the irony here is just too delicious. Even if you are completely clueless about Glass-Steagall, this is discussed in detail in the Wikipedia page about it. It takes a special person to know nothing about a subject, not even do the 20 seconds of research needed to confirm a claim, and still feel like insulting other people for their factual claims is a good idea.

(As for your substantive point... No. Countrywide, for example, was not taking risks on the "investment side" under the meaning of Glass-Steagall; they didn't even have an investment side. The core damage there was a pure-play retail bank making crap loans, and Glass-Steagall says that's awesome. You're arguing against the repeal of a regulation which never existed. Might have been a good one though.)

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