Quick question

At the same time there will be an inevitable regulatory response to this crisis, which may well bring back a form of division between investment and commercial banking to limit the contagion between wholesale and retail banking.

Given that it\’s the stand alone investment banks which have been going bust, with the universal banks being large enough to absorb the losses, why would we want to bring back Glass-Steagal?

5 thoughts on “Quick question”

  1. Because we want to allow those banks to fail rather than be forced to put public money up to rescue contaminated universal banks.

  2. What Kay Tie said: and much more attractively from a politician’s viewpoint, because They Can Be Seen To Be Doing Something.

  3. “Because we want to allow those banks to fail rather than be forced to put public money up to rescue contaminated universal banks.”

    …of which there, err, aren’t any.

  4. Isn’t UBS an example of a contaminated universal bank?

    isn’t it about the best way to control the level of risk to an economy? Is it better to have separation of responsibilities in finance? When you look back, most of the old UK retail banks have done badly when they aspired to move into the world of investment banking – ie they tried and failed to become universal banks. And yet in the UK was it not a retail outfit – Northern Rock – that went bust with another – HBOS _ looking set to follow. Is the best thing just to ensure through competition policy to ensure that no economy is at the mercy of one institution?

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