I need some help here from those closer to the inner workings of the Barrack Obama campaign. I have it from fairly good sources that Obama has a strong economic team, and that he’s intelligent.
So why would he advocate a position based on the repeal of Glass-Steagall in 1999?
Just to rattle off a few bullets:
- Glass-Steagall prevented companies from having both commercial & investment banks.
- The products of the mergers that were enabled post-Glass-Steagall have been the most stable in this crisis, because they have large deposit bases in their commerical arms to balance the leverage in their investment arms.
- The non-diversified firms, both commercial & investment banks, have been the hardest hit.
- The investment banks that are remaining (Goldman Sachs, Morgan Stanley) are pursuing this joint model to survive the crisis. It wouldn’t be possible if Glass-Steagall were in place.
- The universal banks, like those in Europe, are proving to be the acquirers in this crisis.
- Academic research has effectively shown the fallacy of the original Glass-Steagall approach, which is why Bill Clinton supported the effort in 1999. A majority of Democrats, including John Kerry & Joe Biden, voted for the final bill in 1999, as did a majority of Republicans.
The WSJ has a nice editorial here on the topic. Marginal Revolution, as usual, has good data too.
Can someone help explain this one to me? Is he just hitting McCain over the head with an easy talking point? Or does he actually believe that repealling Glass-Steagall was a mistake?
This election would be a lot more enjoyable if either candidate was making any sense on economic issues.