Lehman Bankruptcy Administrator Calls for Glass-Steagall

September 15, 2013 • 9:48AM

"Lehman Bankruptcy Administrator Recommends Worldwide Trennbankensystem!" (Glass-Steagall.) So ran headlines throughout the German-language press in Europe today. Agence France Presse (AFP) reported on Lehman administrator Bryan Marsal's interview in Die Welt today emphasizing Glass-Steagall among numerous things he said in the interview. Marsal told the paper he had fully supported the repeal of Glass-Steagall, "until I saw what happened to Lehman." So much for all the talk of Lehman's not being a universal bank, and Glass-Steagall's repeal having nothing to do with its collapse and the crisis.

When Die Welt reporter Sebastian Jost implied that just forbidding proprietary trading (the "Volcker Rule") would suffice, Marsal answered, "The distinction is artificial. You can't draw a hard line between proprietary and customer-requested trading. Therefore the bank should decide: Either it does classic retail and business customer business—or it engages in investment banking, trading securities, and works with hedge funds. Both together don't work. Business with exotic products, which are mainly used for casino games, I would simply forbid that."

Strong words, which should also apply to German Sparkassen (savings & loans) and other public banks, which are again creating their own contractual gambling bets to sell them to their depositors with such exotic Certificate names such as "Knock Out Call Warrant," "Airbag Certificate," etc.