Golden age is all in the imagination

Tupungato / Shutterstock.com

Article Highlights

  • Those who speak of "golden years of prudent banking”  have little knowledge of banking history

    Tweet This

  • People forget about the crises which occurred with Glass-Steagall in force

    Tweet This

  • Between 1982 and 1992, more than 2,000 US financial institutions failed

    Tweet This

Sir, Bill Dacombe (Letters, August 1) thinks there were “golden years” of “prudent banking” before 1999 thanks to the Glass-Steagall Act. Apparently he does not remember the commercial real estate lending bust of the mid-1970s, when the US banking system was arguably insolvent on a mark-to-market basis from bad loans. Or that the whole savings and loan industry was insolvent by 1979, an insolvency then exacerbated by more bad real estate loans. Or that in the early 1980s, the oil lending bubble collapsed, and so did nine of the 10 largest banks in Texas, among others. Or that the 1980s threatened a systemic banking breakdown from huge bad loans to what were then called “LDCs” (least-developed countries), which defaulted together. Or that farm lending also crashed in the 1980s. Or that, following all that, there was another huge commercial real estate lending bust in the early 1990s. Or that between 1982 and 1992, more than 2,000 US financial institutions failed.

All this happened with Glass-Steagall in force. “Golden years of prudent banking” ? Only for those with little knowledge of banking history and a longing for an imagined past.

Alex J Pollock,Resident Fellow, American Enterprise Institute, Washington, DC, US

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alex J.
Pollock

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.