In Washington, Is the Glass(-Steagall) Half Empty or Half Full?

This post was originally featured on Tom Dispatch.

Donald, listen, whatever you’ve done so far, whatever you’ve messed up, there’s one thing you could do that would make up for a lot. It would be huge! Terrific! It could change our world for the better in a big-league way! It could save us all from economic disaster! And it isn’t even hard to grasp or complicated to do. It’s simple, in fact. Reinstitute the Glass-Steagall Act. Let me explain.

In the world of romance, if you break up with someone, it’s pretty simple (emotional complications aside). You’re just not together anymore. In the world of financial regulation, it used to be as simple as that, too. It was like installing a traffic light at a dangerous intersection to avoid deaths. In 1933, when the Glass-Steagall Act was passed, it helped break up the biggest banks of the day and for good reason: they had had a major hand in triggering the most disastrous economic depression our country ever experienced.

Certain divisions of those banks were no longer allowed to coexist with others. The law split the parts of banks that placed bets by creating and trading certain risky securities and those that took deposits and provided loans. In other words, it ensured that the investment bank and the commercial bank would no longer cohabit. Put another way, it separated bankers with a heinous gambling habit from those who only wanted a secure nest egg. It was simplicity itself.

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