Tuesday, 15 December 2009 00:00

For those who thought the government had no leverage in coercing banks to loan more...

From Bloomberg :

Dec. 15 (Bloomberg) -- The U.S. House is considering reinstituting the Depression-era Glass-Steagall Act, which barred bank holding companies from owning other financial companies, Majority Leader Steny Hoyer said today.

A renewal of the 1933 law “is certainly under discussion” by House members, Hoyer, a Maryland Democrat, told reporters in Washington. The Glass-Steagall law was repealed in 1999.

Hoyer made the comments when asked whether Congress and the Obama administration could do more to persuade banks to make more business loans to get credit flowing into the economy.

“As someone who voted to repeal Glass-Steagall, maybe that was a mistake,” Hoyer told reporters.

The repeal removed a regulatory obstacle to the $46.4 billion merger of Citicorp and Travelers Group Inc. to form Citigroup Inc.

In the current environment, this will literally devastate many of the uber banks, for the trading arms are the only portions of the bank making money - and they wouldn't be making money if they didn't get nearly free access to capital through their insured banks status and access to the various government lending facilities.

Last modified on Tuesday, 15 December 2009 00:00

1 comment

  • Comment Link Mark Hankins Wednesday, 16 December 2009 08:36 posted by Mark Hankins

    Severed from their trading arms, the big banks would be in desperate need of another bailout that would scarcely be available to them, resulting in chaos in the banking sector not seen since the Bank of the United States failed.

    If you're standing in the same room with your nuke, how exactly is it leverage?

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