December 28, 2015
By Jon Hartley
At a Politico speaking engagement promoting his new book in October, former Fed chairman Ben Bernanke stated that he was “a little puzzled” by Democratic presidential candidates Sen. Bernie Sanders and Gov. Martin O’Malley at October’s Democratic debate placing emphasis on reinstating the Glass-Steagall Act, a Depression era law that would separate commercial and investment banking activities, in order to promote financial stability.
Indeed, the law became a major point of discussion again in November’s Democratic debate as several candidates highlighted the need to “break up the big banks”.
Repealed in the 1999 by the Gramm-Leach-Bliley Act, Glass-Steagall has been a centerpiece law held up by many Democrats who unequivocally demand more regulation for banks. However, without giving enough thought, it’s easy to lose sight that not all regulations are helpful in improving financial stability and that many can be counterproductive to achieving this goal.
Glass-Steagall was irrelevant to the financial crisis since it would not have affected the investment banks and commercial lenders that were distressed in 2008.
Read the full article at Forbes.com: Why Glass-Steagall Would Not Have Prevented The Financial Crisis And Could Have Made It Worse