Global Glass Steagall

Canadian De Tocqueville Does Finance

The world's concentrated financial sector has been grabbing more than its fair share of wealth because it has been able to and this must stop.

"This is like looting," said outspoken Boston money manager Jeremy Grantham. "This industry can grow to gobble up all the benefits of the real economy if allowed to. It is trying to grab our cash. It's obscene."

--Diane Francis, "Time to Bust Up the World's Banking Giants"; National Post (10/24/09)

The above quote is just one of the highlights from Diane Francis' SUPERB piece in Canada's National Post yesterday.

What makes the piece especially worthwhile are: 1) her sweeping, historical take, alighting on everything from Standard Oil more than a century ago to the Microsoft anti-trust saga in the '90's; and 2) her non-U.S. perspective (think of her as "de Tocqueville does finance").

Here's one of Francis' milder indictments of the financial status quo: 'Excessively large banks destroy democracies, like the United States, through inordinate influence on policy, politicians and regulators.'

Her prescription -- and one endorsed by such luminaries as Paul Volcker and Bank of England Governor Mervyn King:

Enact a "global Glass Steagall on steroids" -- making sure that investment banks can't make bets with savers' insured deposits -- and break up the too-big-to fail banks, starting with Goldman Sachs.

Not just great, timely ideas -- but, in Glass Steagall's case, the law of the land for 67 out of the last 76 years.

Devastating arguments, and a truly great read.

P.S.: So is Jeremy Grantham a bomb-throwing Commie? Hardly. More like a Boston Brahmin-type, very Establishment, who runs an $87 billion investment fund.