Professor Misstates Glass Steagall History?

Why No Glass-Steagall II? ... Eighty years ago this month, Ferdinand Pecora, the cigar-chomping former assistant district attorney for New York City, was appointed chief counsel for the US Senate Committee on Banking and Currency. In subsequent months, the hearings of the Pecora Commission featured many sensational revelations about the practices that led to the 1930's financial crisis. – Project Syndicate

Dominant Social Theme: It is simply common sense. If banks can't gamble their own money in the big casino of the global stock market, they won't go broke.

Free-Market Analysis: Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. So why does he, in our view, misrepresent the history of the financial industry in this article posted over at Project Syndicate?

He writes about the US Glass-Steagall Act, which separated commercial and investment banking and suggests that it should be reinstituted. He is a fan of Ferdinand Pecora, whom Franklin Delano Roosevelt picked to head up the 1930s hearings that led to various regulatory impositions including the Securities and Exchange Commission. True, he doesn't mention that there is in force a Volcker Rule currently ... but maybe that's because the Volcker Rule is such a weak version of Glass-Steagall that it's not worth commenting on.

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