Warren Kennedy, Mullumbimby
Perhaps Patricia Warren will forgive some scepticism about the intended effect of the proposed Banking System Report (Separation of Banks) bill 2019. It’s just that I’m unaccustomed to finding myself in accord with Senator Hansen.
It’s a strange feeling, however, if the sole intention of the bill is to separate retail and commercial banking from wholesale and investment banking then, my lips can scarcely frame the words, it sounds like a good idea.
In 1933, in the wake of the 1929 stock market crash and the Great Depression, US Congress enacted the Glass-Steagall Act. This act separated investment and commercial banking activities. All went well until 1999 when Bill Clinton signed a bill repealing the Glass-Steagal provisions which many people believe led directly to the global financial crisis just nine years later. So the separation would seem to be a good thing.
Reasons given for the repeal, according to Wikipedia, included the ‘repeal would “enhance the stability of our financial services system” by permitting financial firms to “diversify their product offerings and thus their sources of revenue” and make financial firms “better equipped to compete in global financial markets”’.
The trouble was that their diversified product offerings and sources of revenue turned out to be disguised junk.
These reasons will, no doubt, also be trundled out by those opposing the Separation of Banks bill now.