Obama Plan to Split Banks Could Crash Economy

Obama Plan to Split Banks Could Crash Economy

January 22nd, 2010

By John Berlau, Newsmax

 Obama is pursuing FDR like Banking Restrictions

President Obama’s proposal today to bring back 1930s-like separation of commercial and investment banks, dubbed Glass-Steagall II or Glass-Steagall 2.0, would do little to prevent the problem of financial institutions’ being too big to fail.

What it would do is hurt economic recovery, reduce types of financing available to businesses big and small, and give European and Asian financial services firms a huge competitive advantage over their U.S. counterparts.

The president’s proposed regulation would leave U.S. banks, in the phrasing of American Enterprise Institute scholar and former Treasury Department official Peter Wallison, “too big to fail or succeed.”

The proposal puts forth nothing to stop bailouts or modernize bankruptcy laws to make failure less systemic. Instead, it reintroduces a Depression-era structure for banking used nowhere else in the world. And it does nothing to stop the size or systemic dangers of the government-created financial giants Fannie Mae and Freddie Mac that were at the center of the mortgage crisis.

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