Since, by common consent, we are immersed in the worst financial crisis since 1929, it is not surprising some of the old remedies are being considered again. More baffling is how quickly one of them is being dismissed.
The Glass-Steagall Act was passed in 1933 in the New Deal reforms of Franklin Delano Roosevelt’s administration. The Act responded to scandals involving Goldman Sachs and National City Bank, and to a fear of JP Morgan’s overweening power, by splitting off investment banking from commercial banking.
On Friday, Paul Volcker, former chairman of the Federal Reserve, said the US could perhaps do with a new version of Glass-Steagall, this time splitting hedge funds, private equity funds and proprietary trading off from Wall Street banks such as Goldman Sachs and Morgan Stanley.
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