McCain and Cantwell Want a New Glass-Steagall Law | Newsweek Voices - Michael Hirsh | Newsweek.com
What do you think about this? The Glass-Steagall Act was instituted during the Great Depression and made it illegal for investment banks and commercial banks to operate as a single entity, effectively divorcing the two. It was repealed in 1999 by the Graham-Leach-Bliley Act.
In light of the financial calamity last fall, Sens. John McCain and Maria Cantwell are proposing legislation to reinstate Glass-Steagall. They would update it to take into account modern changes that weren't around during the Great Depression, but aside from that it would essentially be the same.
I think this would be an excellent idea. It would make it less likely that a financial disaster in one sector could spread to the other...or if it did, it would at least mitigate the effect. Personally I would go even further than this, and put a cap on the amount of liabilities that banks are allowed to have in the first place, so we don't run into the situation where they're too big to fail. I don't see any evidence of any economies of scale at that size that makes uber-large banks more efficient than medium-large banks.