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Saturday, June 4, 2016

The Case For A Super Glass-Steagall

The Case For A Super Glass-Steagall


Donald Trump can instantly get to the left of Hillary with respect to Wall Street and the one percenters by embracing Super Glass-Steagall.

The latter would cap U.S. banks at $180 billion in assets (less than 1% of GDP) if they wished to have access to the Fed’s discount window and have their deposits backed by FDIC insurance. Such Federally privileged institutions would also be prohibited from engaging in trading, underwriting, investment banking, private equity, hedge funds, derivatives and other activities outside of deposit taking and lending.

Instead, these latter inherently risky economic functions would be performed on the free market by at-risk banks and financial services companies. The latter could never get too big to fail or to manage because the market would stop them first or they would be disciplined by the fail-safe institution of bankruptcy. No taxpayer would ever be put in harms’ way of trades like those of the London Whale.

By embracing this kind of Super Glass-Steagall Trump would consolidate his base in the flyover zones and reel in some of the Bernie Sanders throng, too. 



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