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Wednesday, 24 July 2013

Insuring Deposits, Ensuring Insolvency

By Frank Hollenbeck

The US government is trying to implement the 21st century version of the Glass-Steagall Act of 1933. The proposed bill would separate traditional banks (which are backed by the FDIC) from riskier financial institutions that include companies focused on investment banking, private equity and more. This is to give the impression that governments are taking actions against the financial sector whose actions nearly brought the entire world economy to its knees back in 2008. The implicit assumption is: if this legislation is passed, the banking sector will never again be a source of financial panics. Nothing could be further from the truth.

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