PrintI'm getting tired of hearing arguments, such as those made by William P. Robinson in his letter last Saturday, that the repeal of the Glass-Steagall Act was a major contributor to the most recent financial crisis.
First of all, Robinson needs to get his facts right. The act never prohibited insurance companies from owning banks. In fact, many insurance companies had bank subsidiaries long before the Gramm-Leach-Biley Act repealed portions of Glass-Steagall. My insurance company, USAA, started its bank in 1983, and State Farm opened a bank a full year before Gramm-Leach-Biley.
Second, even Rep. Barney Frank, D-Mass., who would not be confused with a supporter of the banking industry, noted in a recent National Public Radio interview that the demise of Glass-Steagall was not a material contributor to the crisis. He pointed out that two large failures, Lehman Brothers and AIG, were of companies that were not affected by the repeal.
Of course, he omitted the government-sponsored enterprises Fannie Mae and Freddie Mac, whose failures cost the taxpayer several times more than all the others combined and which were also unaffected by Glass-Steagall. Frank is too closely associated with Fannie and Freddie and wouldn't want to emphasize their part in the financial crisis.
Third, the repeal of Glass-Steagall allowed for Bear Stearns to be purchased by JPMorgan Chase and for Merrill Lynch to be purchased by Bank of America. Thus, it can be legitimately argued that Gramm-Leach-Biley actually reduced taxpayer losses that would have been incurred if the government had to bail out those two investment banks. Of course, both Bear and Merrill were operating solely as investment banks prior to being acquired, so the repeal of Glass-Steagall had no impact on their near failure.
Finally, with the exception of Citigroup, which seems to need a bailout of some sort every decade or so, the banking industry hardly needed a bailout.
Most banks took Troubled Asset Relief Program money under duress and, as we now see, are paying it back as quickly as they can. Bank of America, in particular, would have long since paid off its TARP funds had it not made the foolish decision to buy Merrill Lynch and had instead let that company fail and the costs be dumped on the taxpayer.
Look at the entities that are still absorbing taxpayer funds ( Fannie Mae, Freddie Mac and AIG) and then decide where the biggest problem in the financial crisis originated.
\ JIM WADDELL \ Grandview Heights
