HomeArticlesThe Glass-Steagall Act is an Example of Principled Regulation of Business

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The Glass-Steagall Act is an Example of Principled Regulation of Business — 2 Comments

  1. What alternatives do people have at this point instead of using banks? Banks followed the bailout with a huge program of building of new branches, very little lending, an overwhelming expansion of paperwork for anyone who has a loan, and now a proliferation of fees. I think any competitor would easily get peoples’ money if there was seen to be a viable alternative, but in general people think of banks as the only possibility.

    • Banks are useful economic tools if they behave in principled ways. In a post-agrarian industrial economy, money is an efficient method to facilitate the exchange of goods and services. The questions revolve around who controls the money and how is it used.

      Banks can lend people money to get a house or a business started; and, they can lend out deposits and pay part of the interest on them to depositors. Normally, banks might lend for 5% and pay 2 1/2% to depositors, they live on the 2 1/2% difference. This is principled banking behavior. In normal world you would actually make something more than .5% on savings and interest would not be taken by governments or corporations.

      Today those numbers are skewed and people get almost nothing for deposits because government is out of control and has to keep rates low in order to pay its own debt. If interest rates were much higher the US government would go bankrupt. It is already unofficially insolvent.

      Thus government both has destroyed traditional banking formulas by its debt, and allowed banks to consolidate too far, eliminating the competition necessary for reduced fees.

      In my view, it is not necessary for banks to buy stocks. I think individuals are better served when they can invest some of their retirement income in stocks and not compete with bank or government investments. In a country “of the people, by the people, and for the people” governments and corporations are still necessary, but they do not need to displace the people. Bank speculation with people’s deposits actually reduces the amount people can get from stocks because it dilutes their share, and rewards go to corporations which, by definition cannot be moral or experience happiness. That is something only individuals can do.

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