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Why Most Bankers Pine for Glass-Steagall’s Return

May 10, 2017 (EIRNS)—In an ironic counterpoint to Goldman Sachs CEO Lloyd Blankfein’s observation yesterday that his firm is ready for Glass-Steagall to come back, Bloomberg News published data that same day, showing that all banks should be yearning for the return of the Glass-Steagall Act.

Goldman Sachs is not really a bank, but Bloomberg’s chart of the "S&P 500 financial firms"—including hundreds of large Wall Street, regional and medium-sized banks—shows they made better profits under the Glass-Steagall regime than without it. Their collective return on common equity stayed in the 15-18% range during the 1980s and 1990s, but dropped to the 10-15% range from 2000 onwards, and then dropped sharply in 2007 and went negative in 2008. Since the crash the return on equity has always been below 10%.

A more dramatic chart concerns what the banks’ stock is worth. It shows the ratio of price (of stock) to book (value of assets) for those same banks. It was much higher in the 1990s than at any time since 2002, and since 2007 has been only half the 1990s value, even while the Fed’s zero interest rates and "quantitative easing" bailouts have run the stock markets up tremendously.

The Bloomberg column is headlined "Don’t Pine for Glass-Steagall," and it is as nonsensical a pile of trash "arguments," as has ever been seen in a month of non-stop, fearful Wall Street attacks on restoring the Act. Its author hilariously misses the point of his own, carefully compiled charts: Sound banks will, in fact, make higher profits and have higher stock values under a restored Glass-Steagall Act. And many of the nation’s 6,000 independent banks do, in fact, pine for it.