Can a Return to Glass-Steagall Provide Financial Stability in the US Financial System?
PSL Quarterly Review, Vol. 63, No. 252, pp. 37-73, 2010
37 Pages Posted: 22 Apr 2011 Last revised: 21 May 2012
Date Written: April 15, 2011
In the immediate aftermath of the current financial crisis in the United States the response has been to resolve small and medium size banks, while large banks experiencing financial trouble have been given both direct and indirect government support. This, however, has resulted in a number of larger banks absorbing smaller ones, creating an even smaller number of even larger banks that dominate the financial system. This article deals first with a comparison of the problems created by “too big to fail” financial institutions. The second section deals with the possible restoration of Glass-Steagall type legislation as a means of restoring single-function financial institutions. It concludes that alternatives to separation of functions will have to be found to deal with multifunction financial institutions since most lending activity requires securities markets activities.
Keywords: Financial Crisis, Instability, Rules, Banking System
JEL Classification: E50, G01, G20, F30, N22
Suggested Citation: Suggested Citation