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Notes From the Fieldby Martin Weil

July 26, 2013

Conservatives and Libertarians Should Support the Return of Glass-Steagall

So writes the always insightful Bill Black, lawyer, academic and former banking regulator best known for his role in the Savings and Loan Crisis of the 1980s.

Glass-Steagall prevented a classic conflict of interest that we know frequently arises in the real world.  Commercial banks are subsidized through federal deposit insurance.  Most economists support providing deposit insurance to commercial banks for relatively smaller depositors.  I am not aware of any economists who support federal “deposit” insurance for the customers of investment banks or the creditors of non-financial businesses.

It violates core principles of conservatism and libertarianism to extend the federal subsidy provided to commercial banks via deposit insurance to allow that subsidy to extend to non-banking operations.

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