Silicon Valley Bank
Signature Bank
First Republic Bank
Together, these three failed banks held more assets than the 25 banks that collapsed during the 2008 financial crash.
How can we prevent this financial meltdown from getting worse? Make banking boring again….(read more)
LEARN MORE ABOUT: Bank Failures
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Bank failures can have devastating consequences for both individuals and the economy as a whole. When banks fail, people lose their savings, businesses lose access to credit, and confidence in the financial system diminishes. So, the question remains: How can we stop bank failures?
In a recent article for The Guardian, Robert Reich, former US secretary of labor and professor of public policy at the University of California, Berkeley, proposed a simple solution: Make banking boring. According to Reich, the key to preventing bank failures lies in reining in the excessive risk-taking and speculative activities that have become commonplace in the banking industry.
Reich argues that the root cause of bank failures is the pursuit of high profits through risky financial activities, such as derivatives trading and subprime lending. These activities not only put the stability of individual banks at risk, but they also have the potential to destabilize the entire financial system. To address this issue, Reich suggests implementing regulations that discourage banks from engaging in these risky activities.
One possible way to make banking boring, according to Reich, is to reinstate the Glass-Steagall Act, which was a federal law that separated commercial banking from investment banking. This law was repealed in 1999, leading to the rise of massive financial institutions that engaged in both traditional banking activities and risky investment activities. By reinstating Glass-Steagall, banks would be forced to focus on their core banking activities, such as taking deposits and making loans, rather than engaging in speculative trading.
In addition to reinstating Glass-Steagall, Reich advocates for stricter capital requirements for banks. This means that banks would be required to hold a higher amount of capital in relation to their assets, which would serve as a buffer against potential losses. By requiring banks to maintain more capital, they would be less likely to take excessive risks with their assets, thus reducing the likelihood of failure.
Furthermore, Reich suggests implementing a financial transactions tax, which would discourage speculative trading and generate revenue for government oversight of the financial system. This tax would make it more expensive for banks to engage in high-frequency trading and other speculative activities, thereby reducing their incentive to take on excessive risk.
While these measures may sound drastic, Reich argues that they are necessary to make banking boring and prevent future bank failures. By discouraging banks from engaging in risky activities and ensuring that they have enough capital to weather potential losses, the financial system can be made more stable and less prone to collapse.
Ultimately, the key to stopping bank failures lies in creating an environment where banks prioritize the safety and soundness of their operations over the pursuit of short-term profits. By making banking boring, we can help ensure that the financial system serves its intended purpose of facilitating economic growth and stability.
Really, banks require more regulation. The entire idea of banking as "let's gamble" is terrifying. Because they discovered in 2008 that the government will always bail them out, there are no repercussions. These bank crisis are so worrisome. This whole financial crisis and the Great Recession posed the most significant macroeconomic challenges for the United States in a half-century, leaving behind high unemployment and below-target inflation and calling for highly accommodative monetary policies. And this is only the beginning!
Glass Steagall would still leave major decisions about how we direct our surplus to private bankers. I say this time we go more radical and nationalize the banks.
CAMEL
There’s a difference between investing and speculating and Wall Street tends to speculate or gamble or call it speculative or speculatory investments to get around things and still call it investments, and I thought glass stegall act was still law we were taught about growing up in the 90s during the Clinton administration as if it was still the law of the land.
I’m noticing a lot of trends all around the 1980s…the savings and loan crisis, the graph here that showed speculative investments suddenly rising again while manufacturing was falling, reagonomics aka trickle down economics that never actually trickles down, the trend in deregulation that made electricity and phone bills and daily expenses start going unregulated and out of sight into price gouging territory in some places, the switch from housing being a necessity/commodity to it now being viewed as equity and investments to keep Wall Street happy and buoy corporate balance sheets and disguise losses.
Also why are good laws repealed like glass stegal without anyone even knowing or hearing about it while antiquated laws get left on the books and never repealed from hundred or two hundred years ago that mistreat women or treat people badly/poorly or strip rights from people and we are told they are old/antiquated not enforced anymore don’t worry about it it would cost too much to get them removed/repealed/etcetera, yet they find time to strip away consumer protection and banking regulations and environmental protection laws almost every day it often seems. And if you ever watched cspan in the 1990s you saw congress usually sits around doing absolutely nothing or members fail to show for their sessions or go off on vacation all the time and nothing ever seems to get done and their legislative agendas are often like five items for each political party per session or year and staying up front they will be unlikely to actually get through half of their agendas during a session before the session ends for a holiday and it might be two to five years before it is on the agenda/docket again, unless it’s something horrifyingly bad then it has a habit of coming up repeatedly even if it isn’t on the docket/agenda as whatever party or lobbyist will keep pushing it forward every chance they get it seems.
Again Mr. Reich gives a simplistic explanation of something he doesn't appear to understand.
Perhaps, they should look to other countries. For example, since 2001 America has endured 562 bank failures, not including Silicon Valley Bank. In Canada, there were zero.
Bill Clinton's signature is on that repeal bill. A democrat I might add.
I would LOVE to have Robert Reich as POTUS.
Awesome video. Thanks for your work.
Answer: Get rid of money. It is just worthless paper.
This guy doesn't know what he is talking about. Banks fail because they embezzle from their clients. You can only embezzle for so long until people need the money (Ponzi). So when they need the money, and the bank doesn't have it, the Federal Reserve counterfeits it. The counterfeit bills enter circulation, and since they are fungible and have no value, the market discounts the value of all the money to account for the counterfeit amount.
If you want to stop the nonsense of embezzlement followed by counterfeiting to cover the embezzlement, make banks hold a reserve requirement that is large enough that the bank can carry PRIVATE insurance for the outstanding risk (not 'public insurance'). I would assume that a 60% – 80% reserve requirement ought to do it, but it may need to be higher to remove the US taxpayer as insurer.
But, this guy would cry if you did that because banking would be really, really boring. You wouldn't need a Federal Reserve. and the basis of money could be moved back to gold instead of fiat – Federal Reserve Notes. You would probably have to pay for you checking accounts, but once the moral hazard is gone, the banks would never fail nor would they need to be bailed out.
In my opinion if anything is too big to fail then it's also too big to be privately owned. The whole point of private ownership is to maximize your profits. Any Bank that needs to be bailed out should also become nationalized
Simple: Do NOT let DEMONRATS in power
It seems like a good proposal, but there are significant lobbying interests that would fight to prevent it, and indeed, fought to overturn it the first time. Our political system is compromised in a way that prevents laws in the interest of the people when they conflict with the profits of enterprise.
Why have you never run for Prez? I know, who'd want that job!
Face it the 1% would love to see the debt ceiling cause world economic downturn. Sure they'll take an initial hit, but then they will start scooping up as much as they can at bargain prices. And don't forget War with China or Russia…Big money in that while steering society in any direction they want.
Build back BIGGER AND BETTER? The destruction of Glass-Steagle must have been when rapport between the parties was still functional, before Lizard brain and Rusty laimbrain hate monger?
Don't have banks… boom problem solved. Banks are not necessary for society to function.
why did Clinton repeal this as a lame duck. Did Star find something in his 3 yr investigation and cut a deal? YOU were there, Robert, inquiring minds want to know
Needs to be a public banking system for everyday Americans. If you choose to use a private bank then you can but if ya want your money to just be held and protected then I think the us government should provide one. Would simplify taxes and if you get government assistance
The west needs to go over to crypto.
The problem today is that bank can make their own money.
Paper money can't be put into the banks.
But, if every cent had a crypto code, then that code was passed to the banks.
The money in the bank would then be real money, not something that the bank made.
And, with this, every citizens can get their own account that wasn't controlled by any commercial bank.
Of course with no intrest, and loans.
On top of this, you can divide the bank sector, to.
To provide loans, and intrest rates.
Professor what are your thoughts on the Chicago Plan revival?
Usually I don’t agree with this guy but this bank reform sounds so logical , we need it
Forget reforms, and nationalize all banks
Yeah, we don't need a bunch of casino addicted people managing our money at all..
i have a better idea
make banking and bankers extinct
Glad i got my money in Fed credit union and in land
Is this a good time to buy stocks/crypto in the Europe? I know everyone is saying stocks are at a discount and all, but just how long will It take for us to recover, obviously there are strategies to manoeuver in this present market but these strategies doesn't come common to the average folk, or am I better off putting my money elsewhere.
Glass-Steagall
Listening to the left is like listening to a mcdonalds spokesmen advise you on healthy eating.
And now you know why Europeans heavily regulate their banks and corporations. They learned their lesson from corporate fascism a hundred years ago. While America slips into corporate conglomerates with 3 or 4 companies controlling the internet and mobile, in Europe you have about 40 and they are required to bring broadband to everybody. There is true competition.
There are at most, 5 major companies controlling broadcast media, all of whom care about ratings and investors than people. It’s time to bring back the fairness doctrine and hold cable news, especially Fox and other right wing entertainers accountable for the misinformation they spread in the name of opinion and getting an audience. Like the head of CBS once said that Trump is bad for the country but great for their ratings.
One of the reasons I only use credit unions.
Nationalize the banks put it under our control and keep a close eye on everything that happens. It’s too important to make a greedy money grubbing operation of something that is essential to the country you know every time the government turns around and says it’s called national security.
No bank or insurance companies just let all or most of the money set in a vault. They all ways have and all ways will. The dividing the banks will not make a difference it all!!! That’s like a person putting money in two different pockets.
Let Corporate America and big business take care of themselves. These are billionaires in the economy, and let them support themselves. Hopefully, the government can monitor them from colluding. Competition is a cornerstone in our capitalist economic system, and that is the way it ought to be and should be going over 400 years strong.
Clinton repealed glass Stegall as a compromise to appease Newt and congress that was controlled by Republicans.
Thanks for the education, Robert Reich (You're always accurate and a terrific teacher and disseminator of the truth we rarely hear on MainStream Media)! But—you have failed to tell us how we may (individually and/or as a group) best "bring back Glass-Steagall"! Are you able to safely tell us how to do so? If you can, please.