The Banking Act of 1933, better known as the Glass-Steagall Act, was introduced to contain the financial crises of different times. We are now living in a different era, which requires different measures and solutions. That's why it is not prudent to focus solely on Glass-Steagall, as if it is the chief panacea for all the financial crises that could possibly occur in the future. The major problem ailing our financial system is the massive amount of debt that megabanks are allowed to hold. Also, this is something that cannot truly be legislated because banks should be allowed to conduct their businesses as they see fit. But, when banks take on too much debt, it makes it very hard for the government not to bail them out, especially when they are too big to fail. For this reason, banks shouldn't be allowed to be in such a position without tight legislation because they could wreak havoc to the wider economy. Therefore, the prevailing thinking that banks that are too big to fail should be bailed out when they fall into liquidity troubles needs to be changed: If and when banks get into trouble because they don't have sufficient cash to conduct business, they shouldn't be bailed out by tax payers thru their governments. When they are bailed out, it only encourages more bad banking practices. But, if the market is allowed to sift through the maze of financial challenges, the right solutions can be arrived at; if the bank needs to go bankrupt, then that is what should happen. That will make other banks to be more careful about their banking practices.



Therefore, regulators should enact the following major law that would make it harder for megabanks (i.e. banks that are potentially too big to fail) to fall, by requiring these banks to have a minimum equity relative to total assets of 33.33%. Currently, as Professor Johnson has pointed out, these banks have an average of 5% equity relative to total assets, meaning that they are 95% financed with debt. That should be raised to 33.33%. It is good to note, however, that all over the world, due to the leadership and guidance provided by the United States, the capital reserve requirements for these megabanks have been increased. But, that is not enough to stem a possible global financial collapse. These banks should be allowed to hold a maximum of 66.66% debt, with equity assets of 33.33%. Sooner or later, there's going to be another recession. If the recession is as big as the previous Great Recession, or, bigger, and, is caused by the systemic failure in the banking system, then, all banks that do not have this 33.33% equity relative to total assets, will go bankrupt if they are not bailed out by taxpayers. If that happens, it will clean up the banking system and enable only the good, or solvent banks, to remain open. But, if they are once again bailed out by their governments, the problem will only get worse, because the global economy won't be growing because most of the money that's generated in the economy will end up going to pay debts, as present. Finally, as for Glass-Steagall, banks should be allowed to innovate as the prevailing times demand, and, restrictions shouldn't be placed on conducting investment bank services with deposits from the banks' customers. However, this can only work when a minimum of 33.33% equity relative to total assets is adhered to. Otherwise, there's going to be havoc in the global financial markets.