Glass-Steagall Folklore ... Debunked
1991; American Bankers Association; Volume: 83; Issue: 9 Linguagem: Inglês
ISSN
0194-5947
Autores Tópico(s)Economic, financial, and policy analysis
ResumoThat is one story that everybody knows about great Wall Street Crash of 1929'? It's this: During and immediately after crash, many titans of finance, speculators, and ordinary investors found they were ruined and hurled themselves from high windows streets below. trouble is, it never happened. As economist John Kenneth Galbraith detailed in his book, The Great Crash, 1929, an examination of suicide statistics for year 1929 shows suicides, both in New York and nationally, were actually higher during months that immediately preceded crash, and then noticeably declined during crash and immediately afterward. legend of ruined millionaires jumping en masse from high windows probably began as a small folk tale based on a few isolated incidents (Ivar Kreuger, Match King, was ruined and shot himself in 1932), then grew with telling, and eventually became enshrined in national consciousness. It has persisted over more than six decades, and millions of people know it be true, even today. Facts vs. folklore. There is a basic problem in thinking about present and future roles of financial service industries: facts are forever taking a backseat folklore. This might be no more than a minor irritation, except that banks are facing extraordinary challenges today. Proposals are afoot drastically restructure banking industry, and certain old wives' tales are still around, still widely repeated, and still impeding serious discussion. Last June, House Banking Committee passed a bill that would put banking industry on an entirely new basis by permitting it compete far more freely in other financial services. bill largely paralleled Administration's proposals made earlier in year, and in many ways accorded with position adopted by American Bankers Association. As it was reported out of committee, bill would allow bank holding companies have separate affiliates with full securities powers, which in effect would repeal those portions of GlassSteagall Act of 1933 which placed largest segments of securities business off-limits commercial banks. Insurance affiliations would be permitted a greater extent than now, as would industrial ownership of banks in some cases. Other provision would permit full interstate banking, and a refinancing of FDIC's insurance fund. These are all very major changes, and as of August Congressional recess, prospects of many of them surviving ministrations of Rep. John Dingle's Energy and Commerce Committee were less than bright. What Congress will do when it reconvenes after Labor Day, with only a few weeks left before breaking for elections, is a day-to-day proposition. Needless say, segments of competing financial service industries-especially securities and insurance-as well as some members of Congress see increased competition from banks as a serious threat. opposing industry groups have lost a series of court and regulatory battles banks in recent years over supposed encroachment on what they believe be their exclusive turf. But they continue insist that banks must have far more circumscribed powers than all other financial service providers, supposedly to protect public interest. Overconcentration. To make this argument, folk myths are often evoked. For example, there is oft-expressed fear of the vast concentration of power at banks, which would grow by leaps and bounds if banks were permitted access additional lines of business. In point of of fact, no industrialized country in world has a more diffuse or less concentrated banking system than U.S. There are currently more than 12,000 banks in U.S. By comparison, countries with populations ranging from one-tenth (Canada) one half (Japan) U.S. population have banks numbered in hundreds or less. …
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