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My Sunday Washington Post Business Section column is out. This morning, we push back on the meme that the repeal of Glass Steagall was not relevant to the overall credit crisis. The impact of the repeal was that banks got bigger, more leveraged more complex.

Its a fairly straight forward argument that Glass Steagall was part of a continuum of radical deregulation that was a major contributor to the collapse.

Here’s an excerpt from the column:

“The repeal of Glass-Steagall may not have caused the crisis — but its repeal was a factor that made it much worse. And it was a continuum of the radical deregulation movement. This philosophy incorrectly held that banks could regulate themselves, that government had no place in overseeing finance and that the free market works best when left alone. This belief system manifested itself in damaging ways, including eliminating regulation and oversight on derivatives, allowing exemptions for excess leverage rules for a handful of players and creating dangerous legislation. As the events of 2007 to 2009 have revealed, this erroneous belief system was a major factor leading to the credit boom and bust, as well as the financial collapse.”

Its sure to bring the members of team cognitive dissonance out.

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Source:

Repeal of Glass-Steagall: Not a cause, but a multiplier

Barry Ritholtz

Washington Post, July 5, 2012

http://www.washingtonpost.com/repeal-of-glass-steagall-not-a-cause-but-a-multiplier/2012/08/02/gJQAuvvRXX_story.html

Repeal GS (PDF)