Prior to the Stock Market Crash of 1929, Banks combined the two roles of: Commercial Banking (Loans and Deposits) and Investment Banking (Trading, Underwriting and Securities Sales)–just like many do today. After the Crash; however, the two roles were separated into individual institutions by the Glass-Steagall Act.The idea was to separate the risk and safety aspects of the equation. FDIC Insurance was also established, in March of 1933; thus, reducing the chance for a run on banks. Things were calm until the 1990s.
You are probably aware of the risky activities that many Banks made during the 2007-2009 Great Recession. Sub-Prime Mortgages, Questionable Mortgage-Backed Securities Transactions, Trading in CDOs and Credit-Default Swaps, etc. That was just a few years ago. But, should such institutions still have Government-Backing? Shouldn’t they have learned something?
Securities Trading Losses by the so-called “Too Big To Fail” Banks have continued, with JPMorgan Chase believed to have one approaching $9 Billion. And, recently, Barclays, PLC has been slapped with a total fine of $443 Million due to manipulation of LIBOR (London Interbank Offered Rate), between Regulators in the UK and US. Some twenty banks are rumored to be in the Regulators’ cross-hairs, including Citibank and JPMorgan Chase. Haven’t they learned anything over the past few years? (LIBOR is the rate from which many loan and mortgage rates are set-Worldwide.)
If these Banks wish to continue taking the risks, we must break them up now! They are all larger now then they were when they were bailed-out in 2008. Let’s not wait for another Edge of the Precipice Moment, when the Taxpayers will, once again, be forced to Bail Them Out. Let’s put them out of their misery NOW!