If there is anything obvious about our 2008 market crash and our subsequent economic woes, it is that regular banking and wild, risky investment banking need to be separated again.
They had merged and become one in the 1920s, and look what happened.
After the 1929 market crash we separated them, and we managed to settle down the economy. We established six decades of stability and growth. Then we got to thinking, do we really need these regulations?
Why not let regular safe, sound banking take on more edge, do more risky things that can benefit some (well certain bankers anyway)? Why think long term and why consider the common good? Why not re-implement short-sighted, risky, high profit practices that are money shifting rather than wealth or job creating, profit unleashed, profit per se?
So we really loosened things up in 1999, with the repeal of the Glass-Steagall Act, essentially reverting to late 1920s economics. And surprise, surprise: less than a decade later, we had a market crash similar to the one in 1929.
We have since passed the Dodd-Frank Act calling for increased regulation and more separation between regular Main Street banking and risky Wall Street banking. But one major political party (guess who?) is for repealing this and returning to the regulation-free economic atmosphere that caused the 2008 crash.
Nobel Prize winning economist Joseph Stiglitz said it is amazing that anyone would advocate "going back to 2007 to the kind of environment that created the crisis. I understand the criticism of Dodd-Frank that it didn't go far enough (in separating banking practices). That's not where they (Republicans) are coming from."
"They want to recreate the circumstances that allow for bubbles, exploited predatory lending, abusive credit card practices. How anybody can say after those experiences that that's what make an economy good, strong, and that's an economy that will benefit most citizens, I find incredible!"
Stiglitz is right about Dodd-Frank not going far enough. Wall Street bankers, who have seen and admitted the error of their ways, are pushing for more separation, more regulation, and a return to Glass-Steagall.
One is Sanford "Sandy" Weill who was instrumental in getting Glass-Steagall repealed in the first place. He was one of many Wall Streeters pushing and lobbying to get rid of this separation between pure deposit banking and other more questionable financial services. Now he is essentially calling for its re-instatement, if not by name.
Another is Cathy O'Neil, former hedge fund analyst, who has since joined Occupy Wall Street and Occupy SEC, where she hopes to help devise an alternative banking system. She is for effective separation regulation.
And she agrees with Stiglitz that Dodd-Frank doesn't go far enough. She knows how easily it can be gamed by Wall Street. The SEC (Securities and Exchange Commission) needs former Wall Street persons, like herself, to assist in implementing regulations that can't be gamed.
(James Lein is a community columnist for The Minot Daily News)