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

Jan A. Kregel

Bard College - The Levy Economics Institute

Date Written: April 15, 2011

Abstract

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

Kregel, Jan A., Can a Return to Glass-Steagall Provide Financial Stability in the US Financial System? (April 15, 2011). PSL Quarterly Review, Vol. 63, No. 252, pp. 37-73, 2010. Available at SSRN: https://ssrn.com/abstract=1810803

Jan A. Kregel (Contact Author)

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504
United States
845-758-7700 (Phone)
845-758-1149 (Fax)

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