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"Every Thief Opposes Glass-Steagall"—Look at Larry Summers

September 20, 2009 (LPAC)—White House economic advisor Larry Summers provided the proof, yesterday, of Lyndon LaRouche's statement, on Saturday, that every thief opposes Glass-Steagall. Summers provided the keynote speech to a conference, yesterday, co-sponsored by Georgetown University's McDonough School of Business and London's Financial Times. After droning on for 40 minutes about the need to establish financial stability, the first question that Summers was asked was on whether he thought the 1999 repeal of the Glass-Steagall law separating commercial banking activities from investment banking activities was still a good idea. Firstly, he argued that there were no mergers between commercial banks and investment banks between the time of the repeal and the collapse of Lehman Brothers, a year ago, so therefore, "I don't think the suggestion that somehow the repeal caused all this is a plausible one."

Secondly, the problem only existed in stand-alone investment banks, that is, Lehman Brothers and Bear Stearns. "Indeed, a large part of what enabled the resumption of stability at the moment of panic was the conversion of Morgan Stanley and Goldman Sachs to enable them to get access to the discount window... so I don't think the argument that somehow if you separated investment banking and commercial banking you wouldn't have had the crisis is a plausible one."

"Our judgment is," Summers went on, "that the right levels of control on capital and leverage, the right kinds of capacity to create failure, the taking of a systemic approach, is probably a better way to contain [the risk taking by institutions that have access to a discount window] than to put restrictions on the type of activities an institution engaged in one thing can also engage in."


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