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Kindly contrast the effects of the crash in Canada, where banking remained tightly regulated, with the effects of the crash in countries where banking was effec

Kindly contrast the effects of the crash in Canada, where banking remained tightly regulated, with the effects of the crash in countries where banking was effectively deregulated.

CWuestefeld 15y ago
Kindly contrast the effects of the crash in Canada You've completely ignored the argument in the article I referenced, and instead are relying your own assumption that correlation equals causation. If you want to argue from a comparison with Canada, you're going to have to flesh out your argument much more than "Canada is more regulated, and didn't have the same effect we did", since there's a world of other differences in the situation. The economics experts have studied the situation, and found that the repeal of G-S couldn't have been the cause. Consider [1] [QUOTE] Given a history like this people wonder how repealing the law could have been a good thing. But a significant academic literature has investigated these claims and rejected them. Eugene White, for example, found that national banks with security affiliates were much less likely to fail than banks without affiliates. Randall Kroszner (now at the Fed.) and Raghuram Rajan found that (jstor) securities issued by unified banks were (ex-post) of higher quality that those issued by investment banks. A powerful book by George Benston went through the entire Pecora hearings which supposedly revealed the problems with unified banking and found them to be a complete sham. My colleague, Carlos Ramirez later showed that the separation of commercial and investment banking increased the cost of external finance (jstor). Finally, my own work (pdf) unearthed the real reasons for the separation in a titanic battle between the Morgans and Rockefellers. Thus, the history of banking before Glass-Steagall and now our recent experience after is consistent, generally speaking unified banking is safer and repeal was a good idea. [/QUOTE] And it's not just a question of academic theory. The actual empirical evidence bears this out. Let me expand my original quotation from the article [2]: [QUOTE] Just look at which organizations have failed: * Bear Stearns was an investment bank before it was sold to JP Morgan Chase (which includes a commercial bank). * Fannie Mae were Freddie Mac were government sponsored entities before the government bought them. * Lehman Brothers was an investment bank before it want bankrupt. * Merrill Lynch was an investment bank befor it was sold to Bank of America (which is a commercial bank). * AIG is an insurance company with no commercial banking division. ... If Glass-Steagall's repeal had meaningfully contributed to this crisis, we should see the failures concentrated among megabanks where speculation put deposits at risk. Instead we see the exact opposite: the failures are among either commercial banks with no significant investment arm (Washington Mutual, Countrywide), or standalone investment banks. It is the diversified financial institutions that are riding to the rescue. [/QUOTE] [1] http://marginalrevolution.com/marginalrevolution/2008/09/glass-steagall.html http://marginalrevolution.com/marginalrevolution/2008/09/gla... [2] http://blog.heritage.org/2008/09/22/the-glass-steagall-myth/ http://blog.heritage.org/2008/09/22/the-glass-steagall-myth/

Kindly contrast the effects of the crash in Canada, where banking remained tightly regulated, with the effects of the crash in countries where banking was effectively deregulated.

CWuestefeld 15y ago

Kindly contrast the effects of the crash in Canada You've completely ignored the argument in the article I referenced, and instead are relying your own assumption that correlation equals causation. If you want to argue from a comparison with Canada, you're going to have to flesh out your argument much more than "Canada is more regulated, and didn't have the same effect we did", since there's a world of other differences in the situation. The economics experts have studied the situation, and found that the repeal of G-S couldn't have been the cause. Consider [1] [QUOTE] Given a history like this people wonder how repealing the law could have been a good thing. But a significant academic literature has investigated these claims and rejected them. Eugene White, for example, found that national banks with security affiliates were much less likely to fail than banks without affiliates. Randall Kroszner (now at the Fed.) and Raghuram Rajan found that (jstor) securities issued by unified banks were (ex-post) of higher quality that those issued by investment banks. A powerful book by George Benston went through the entire Pecora hearings which supposedly revealed the problems with unified banking and found them to be a complete sham. My colleague, Carlos Ramirez later showed that the separation of commercial and investment banking increased the cost of external finance (jstor). Finally, my own work (pdf) unearthed the real reasons for the separation in a titanic battle between the Morgans and Rockefellers. Thus, the history of banking before Glass-Steagall and now our recent experience after is consistent, generally speaking unified banking is safer and repeal was a good idea. [/QUOTE] And it's not just a question of academic theory. The actual empirical evidence bears this out. Let me expand my original quotation from the article [2]: [QUOTE] Just look at which organizations have failed: * Bear Stearns was an investment bank before it was sold to JP Morgan Chase (which includes a commercial bank). * Fannie Mae were Freddie Mac were government sponsored entities before the government bought them. * Lehman Brothers was an investment bank before it want bankrupt. * Merrill Lynch was an investment bank befor it was sold to Bank of America (which is a commercial bank). * AIG is an insurance company with no commercial banking division. ... If Glass-Steagall's repeal had meaningfully contributed to this crisis, we should see the failures concentrated among megabanks where speculation put deposits at risk. Instead we see the exact opposite: the failures are among either commercial banks with no significant investment arm (Washington Mutual, Countrywide), or standalone investment banks. It is the diversified financial institutions that are riding to the rescue. [/QUOTE] [1] http://marginalrevolution.com/marginalrevolution/2008/09/glass-steagall.html http://marginalrevolution.com/marginalrevolution/2008/09/gla... [2] http://blog.heritage.org/2008/09/22/the-glass-steagall-myth/ http://blog.heritage.org/2008/09/22/the-glass-steagall-myth/