"False. This happened all the time with Glass-Steagall in force. Glass Steagall was repealed in 1999, mortgage backed securities were issued and sold long befor

"False. This happened all the time with Glass-Steagall in force. Glass Steagall was repealed in 1999, mortgage backed securities were issued and sold long before then. Many commercial banks traded MBS under Glass-Steagall as a way of reducing their risk; in fact regulatory bodies encouraged them to do this." We are really getting into details here. This was technically partially true, because Glass Steagall was being progressively watered down long before it was actually repealed. So commercial banks were allowed to underwrite some securities but again there were limits as to how much they could do. I think the limit started at 5% of revenue and then progressively expanded to 25% as GS was being further watered down. But I doubt banks would have been allowed to create the huge amounts of mortgage backed securities they did after the repeal, even in the most watered down version of GS. Also, when the original article argued for the reinstation of Glass Steagall they probably argued for it in its original non-watered down version. As to your second statement, you said "Instead of speculating in "finance", lending went to speculate in "productive assets" like equities and bonds." To me this means that you misunderstood what the original article was trying to say. By productive assets the original article meant direct loans to businesses and individuals instead of financial instruments.