Must-Read: Mark Thoma: Clinton on Glass-Steagall: Right or Wrong?

Must-Read: Mark Thoma: Clinton on Glass-Steagall: Right or Wrong?: “Hillary Clinton said she opposed reimplementing the Glass-Steagall Act…

…which had been repealed in 1999. When the financial crisis struck in 2008, many people blamed the disaster on the removal of the restrictions Glass-Steagall had imposed on banks. However, the evidence doesn’t support this claim, which makes Clinton correct. But that doesn’t mean ending Glass-Steagall was a good idea or that repeal could never cause the kinds of problems that lead to a financial crisis, which makes her wrong…. Even though the repeal of Glass-Steagall didn’t cause the most recent financial crisis, why leave the risk in place?

Those opposed to reimplementing the Glass-Steagall sort of restrictions argue it would hamper bank activities and leave them at a disadvantage. But that’s largely because the banks aren’t the ones who will pay the bill if they’re wrong. In fact, they would likely get bailed out…. The costs associated with Glass-Steagall restrictions on bank activities are small relative to the benefits of avoiding another financial crisis, and the objections of the financial industry shouldn’t stand in the way of a more stable financial system.

November 23, 2015


Brad DeLong
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