The Good Book tells us there's more joy in heaven over one sinner who repents than over 99 good folk who've never strayed from the path of virtue. That being the case, the angels upstairs must be singing the Hallelujah Chorus these days over the return of Sanford I. Weill, a Wall Street legend, to the ranks of the righteous … In a television interview last week, Weill allowed that repealing Glass-Steagall was a grievous mistake. He would, he said, downsize the big banks. – Star Ledger
Dominant Social Theme: We need to return to highly regulated banking.
Free-Market Analysis: Sandy Weill is sending shivers up the legs of those who are partial to financial regulation. In asserting he was wrong and that Glass-Steagall was a prudent regulation, he has now assumed the role of a Wall Streeter who understands that when it comes to the securities industry, Barney Frank, Chris Dodd and Nancy Pelosi are a mitigated or unmitigated good.
Wait, please … A couple of points. The most important: Modern banks and modern banking are terrible! We'll return to Mr. Weill in a moment.
Without going too far into the history of banks and banking, we can certainly say with conviction that today's banking is virtually illegitimate on all levels.
Commercial, banks, Mom and Pop banks – whatever kind of bank you want to mention … it doesn't work, can't work and won't work.
And that's because of the nature of money itself. Only 100 years ago there were just a few central banks; today there are at least 150.
Pro-modern banking enthusiasts – Greenbackers – believe it makes a big difference whether these banks are controlled by public entities (politicians) or private ones.
Actually, it makes no difference at all. The destructive nature of monopoly central banking is evident no matter what. Central bankers, after all, never know how much money is too much. Because of this, they always print too much, creating first a boom and then a terrible bust. Modern banking is at the mercy of this boom-bust cycle.
To try to counteract this cycle, various regulations have been introduced, chief among them Glass-Steagall, which splits up commercial and investment banks.
This bifurcation is said to be safer for the average investor, but actually what would be the best idea of all would be to reintroduce monetary competition into banking. The lack of competition is what makes modern banking so lousy.
This lack of competition runs deep. While the current system seems to have reached a nadir within a normal context, it is probably not so. The guiding hand of directed history can be seen to have played a big part in the evolution of modern banking,
Central banking is no accident. It is the way the modern power elite manipulates societies around the world in order to create global governance. It is central banking that provides the funding source.
Central banking, with its convenient boom and busts, is also the mechanism for bankrupting companies and centralizing business and political power.
Banking tycoons like Sandy Weill can offer up various prescriptions, but even the most successful modern-day bankers tend to deal with the world as it is, not as it ought to be. And journalists who have only a vague idea of how banking should operate play right into this notion. Here's more from the article:
"What we should probably do is go and split up investment banking from banking," Weill counseled. "Have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail."
The old model of bank supermarkets that flourished in the look-Ma-no-hands era of the past decade no longer works, Weill said. It's "immobilizing the banking system," he declared.
"The markets worked fine before," Weill added, "and I think they can work fine again if people have confidence in how the financial institutions are structured … with transparency and with limits on how
much leverage can be used."
Weill's interviewer, apparently stunned by what she was hearing from this "Shatterer of Glass-Steagall," asked bluntly if he was suggesting that the banks be broken up — "a pretty radical idea," as she put it.
"That's exactly what I'm suggesting," he said.
In today's world, it may or may not make sense to return to a time of firewalls between commercial and investment banking. But as soon as one discusses the possibility, the idea arises that regulation is necessary to correct marketplace mistakes. Nothing could be further from the truth.
It is the overwhelming regulatory environment that has created today's global financial and economic disasters. Reintroducing competition into banking would be a great deal more useful than reintroducing Glass-Steagall.
