Monday, November 02, 2020

Taming the Megabanks Author: Arthur E. Wilmarth Jr. Publisher: Oxford University Press ASIN: 019026070X

About This Book

Banks were allowed to enter securities markets and become universal banks during two periods in the past century—the 1920s and the late 1990s. Congress passed the Glass-Steagall Act of 1933 in response to the Great Depression. The Act broke up universal banks and established a decentralized financial system composed of three separate and independent sectors: banking, securities, and insurance. That system was stable and successful for over four decades until the big-bank lobby persuaded regulators to open loopholes in Glass-Steagall during the 1980s and convinced Congress to repeal it in 1999.

Congress did not adopt a new Glass-Steagall Act after the 2008-09 financial crisis. Instead, Congress passed the Dodd-Frank Act. Dodd-Frank's reforms tried to make banks safer but left in place a dangerous financial system dominated by universal banks. Universal banks continue to pose unacceptable risks to financial stability and economic and social welfare. They exert far too much influence over our political and regulatory systems because of their immense size and their undeniable "too-big-to-fail" status.

In Taming the Megabanks, Arthur Wilmarth argues that we must again separate banks from securities markets to avoid another devastating financial crisis and ensure that our financial system serves Main Street business firms and consumers instead of Wall Street bankers and speculators.