Reaction to Comizio and Stiglitz
Stiglitz, smart as he is, is allowing himself to be distracted by the President’s tendency to wander off in to irrelevant details that make good sound bites. Sure, forbid proprietary trading by commercial banks if you like; it won’t hurt. But it was utterly irrelevant to the crisis. Also the rule would tend to extend the distinction between commercial and investment banks, which from the point of view of the financial security of the nation is a very bad idea.
The nostalgia for Glass-Steagal—which separated commercial from investment banking for decades—amazes us. Bear Sterns did not take deposits, nor did Lehman, nor Goldman, nor Morgan Stanley. Did that make them less of a “systemic threat”.?
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VG Comizio, formerly of the Office of Thrift Supervision, argues against Obama’s financial reform plans on the grounds that Obama would surrender preemption, the doctrine wherein federal banking regs trump the states. So his idea is what: Federal regulators have been so good at their jobs that we should continue to regard them as the supreme high mugwumps of banking knowledge?
Tags: Andrew Redleaf, bankers, banking deregulation, capitalism, Modern Portfolio Theory, Mortgage Crisis, Regulation, Richard Vigilante, Whitebox
