Let’s bring back Glass-Steagall

From MarketWatch.com:

You remember Glass-Steagall. It was the Depression-era law that separated investment banking and trading activities from retail and commercial banking. It split, for example, J.P. Morgan’s empire into a bank, J.P. Morgan & Co., and a brokerage, Morgan Stanley.

When the law was repealed in 1999, the brokerages and banks were allowed to come together again. And, of course, that’s when the problems began, the biggest of which was the use of traditional banking assets as chips in the casino, mortgages as mortgage-backed securities, for instance.

Actually by 1999, most traditional commercial banks were doing some form of securities dealing through loopholes created in the 1990s. J.P. Morgan, for instance, had actually migrated to an investment bank, and a minority of its business was commercial banking.

After the financial crisis in 2008 and 2009, regulators and lawmakers tried to scale back the free-for-all that “financial modernization” had wrought. The Dodd-Frank Act clocked in at 849 pages in an effort to basically regulate every little piece of the financial markets.

By contrast, Glass-Steagall comprised 37 pages....

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Link: http://www.marketwatch.com/story/dimon-may-be-stupid-but-hes-right-on-banks-2012-05-15