Regulator calls for deregulation
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Wallison: concerned at the Fed's control |
The purpose of the new law was, ostensibly, to repeal the Glass-Steagall Act, which in 1933 forced commercial banks to spin off investment banking operations. That was a big mistake, by almost all accounts. "There is no economic basis for separating commercial and investment banking," says George Benston of Emory University's Goizueta Business School. Countries that restrict securities and non-credit activities of banks are more prone to banking crises, say researchers at the World Bank and elsewhere. And there is already evidence that banks that have been permitted to set up securities operations in the US, on a case-by-case basis, have benefited from diversification. The performance of the two businesses has not been strongly correlated, although profits from securities tend to be more volatile than from banking.
"Part of the motivation for the [new] bill was to put US banking organization...
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