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WSB Bullshit.

abirch 5y ago
I thought WSB was for Well Stated Bullshit :-)
jjulius 5y ago
As it happens, this isn't the first time I've heard this said about Glass-Steagall. Given that I'm pretty ignorant on the subject and that HN likes to foster conversations, would you care to elaborate as to why that post is bullshit?
- LatteLazy 5y ago
  It's not so much about whether he's right or wrong. He just hasn't said anything meaningful. The comment amounts to Glass Steagall repealed, Crisis happened, Other things happened. It doesn't link them together. This is called Post Hoc fallacy: the fallacy that just because one thing happened before another it caused it. https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc Maybe repealing Glass Steagull DID cause the 2008 issues. Maybe it didn't. Lots of things happened between those events. Op doesn't bother to check or evidence either way. You see this a lot in economics/finance especially pop-economics. Something sounds quite convincing until you force yourself to take a breath and consider: is this actually true or does it just suit my conceived notion that more regulation = better? The act itself is interesting: it established a more segregated form of banking. But it was already undermined a lot by various means (amendments, changes of definitions, interpretations by the FED etc). There is a whole article on the decline of the act and most experts seem to think it either wasn't a factor or was but keeping it wouldn't have averted the crash: https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Decline_and_repeal https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legisla... https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93Steagall_Act https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93S...
  - ch4s3 5y ago
    It’s interesting to note that the banks that didn’t need bailouts and didn’t fail were more likely to both take deposits and act as investment banks. It’s also noteworthy that the contagion started in investment banks. This may not refute the hypothesis completely, but it’s evidence pointing in the opposite direction.
    - LatteLazy 5y ago
      I think ultimately people have to decide how they want to pay for their mortgages. We could segregate this sort of "retail" finance. Then it wouldn't really be affected by markets booming and busting. But it would be more expensive and less available. Or we can allow cash to flow from big institutions to small private borrowers. But then we have to accept that when an institution fails it's either bailed out or there is a credit shortage and small retail borrowers have to do without or pay a lot more for a while. That's the basic choice here. That's why Glass Steagell was repealed (in the mortgage space anyway). That's why the bailouts were "necessary" (politicians rightly judged people would rather bailout than see their mortgages spike).
      - ch4s3 5y ago
        Yeah I basically agree with that. I think trends in building, and other shifts in preferences for housing also drive a lot of this.
- VHRanger 5y ago
  The G-S repeal having to do with future crises is a nonsense theory which has been previously been covered in r/badeconomics: https://www.reddit.com/r/badeconomics/comments/5nx2mm/glassstegall_would_have_saved_us/ https://www.reddit.com/r/badeconomics/comments/5nx2mm/glasss... In short: Glass-Steagall was about separating commercial banks from investment banks. Of course, in 2008, pure investment banks largely failed. In any case, banks already naturally separated from diseconomies of scope. The reality is that the G-S repeal was a completely harmless symptom of a more harmful disease: general banking deregulation (and a push against new regulations) in the late 1990s and early 2000s (yes, it was bipartisan in both Clinton and Bush years).
  - diogenescynic 5y ago
    One post in a subreddit makes this settled fact? Yikes.

WSB Bullshit.

I thought WSB was for Well Stated Bullshit :-)

As it happens, this isn't the first time I've heard this said about Glass-Steagall. Given that I'm pretty ignorant on the subject and that HN likes to foster conversations, would you care to elaborate as to why that post is bullshit?

LatteLazy 5y ago
It's not so much about whether he's right or wrong. He just hasn't said anything meaningful. The comment amounts to Glass Steagall repealed, Crisis happened, Other things happened. It doesn't link them together. This is called Post Hoc fallacy: the fallacy that just because one thing happened before another it caused it. https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc Maybe repealing Glass Steagull DID cause the 2008 issues. Maybe it didn't. Lots of things happened between those events. Op doesn't bother to check or evidence either way. You see this a lot in economics/finance especially pop-economics. Something sounds quite convincing until you force yourself to take a breath and consider: is this actually true or does it just suit my conceived notion that more regulation = better? The act itself is interesting: it established a more segregated form of banking. But it was already undermined a lot by various means (amendments, changes of definitions, interpretations by the FED etc). There is a whole article on the decline of the act and most experts seem to think it either wasn't a factor or was but keeping it wouldn't have averted the crash: https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Decline_and_repeal https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legisla... https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93Steagall_Act https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93S...
- ch4s3 5y ago
  It’s interesting to note that the banks that didn’t need bailouts and didn’t fail were more likely to both take deposits and act as investment banks. It’s also noteworthy that the contagion started in investment banks. This may not refute the hypothesis completely, but it’s evidence pointing in the opposite direction.
  - LatteLazy 5y ago
    I think ultimately people have to decide how they want to pay for their mortgages. We could segregate this sort of "retail" finance. Then it wouldn't really be affected by markets booming and busting. But it would be more expensive and less available. Or we can allow cash to flow from big institutions to small private borrowers. But then we have to accept that when an institution fails it's either bailed out or there is a credit shortage and small retail borrowers have to do without or pay a lot more for a while. That's the basic choice here. That's why Glass Steagell was repealed (in the mortgage space anyway). That's why the bailouts were "necessary" (politicians rightly judged people would rather bailout than see their mortgages spike).
    - ch4s3 5y ago
      Yeah I basically agree with that. I think trends in building, and other shifts in preferences for housing also drive a lot of this.
VHRanger 5y ago
The G-S repeal having to do with future crises is a nonsense theory which has been previously been covered in r/badeconomics: https://www.reddit.com/r/badeconomics/comments/5nx2mm/glassstegall_would_have_saved_us/ https://www.reddit.com/r/badeconomics/comments/5nx2mm/glasss... In short: Glass-Steagall was about separating commercial banks from investment banks. Of course, in 2008, pure investment banks largely failed. In any case, banks already naturally separated from diseconomies of scope. The reality is that the G-S repeal was a completely harmless symptom of a more harmful disease: general banking deregulation (and a push against new regulations) in the late 1990s and early 2000s (yes, it was bipartisan in both Clinton and Bush years).
- diogenescynic 5y ago
  One post in a subreddit makes this settled fact? Yikes.