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Why We Need the Volcker Rule (Or Glass Steagall)

You would want to put safe investments and risky investments into different pockets, right?" So that the inevitable travails of the risky investments don't affect the safe ones. That's basically the idea of corporations, and limited liability. And that was the basic idea of separating banks into commercial banks (safe investments) and investment banks (risky investments). So you could let the risk takers fail, while protecting the "safe and sound" institutions.

But the bankers want it both ways. "Too big to fail." ANDĀ the right to make unlimited risky investments on the taxpayers' dime. And unfortunately it looks like they'll get what the want, by defeating the Volcker Rule.

That goes against everything that Mother taught me. "One or the other. Business school or law school (for instance). But not both."

Glass Steagall basically prevented this. JP Morgan had a different mandate from Morgan Stanley (a spin-off). Citicorp was supposed to keep it's distance from Salomon Brothers (prior to the merger that created Citigroup. Bank of America buying Merrill Lynch? Fughedaboutit.

But when Glass Steagall was repealed in 1999, these barriersĀ  (a major protection) came down. More to the point, the repeal signalled that banks would get EVERYTHING ELSE that they wanted.

My parents (who are better Democrats than I) blame Robert Rubin for the crisis. "We wouldn't expect anything better from the Republicans. And people who voted for them got what they deserve," they'd say.

"But Rubin was a DEMOCRAT. He was supposed to look out for us. And he didn't."