Is anyone else longing for the days when banks were banks — and you could even have a savings account that would pay you a decent yield on your money — which was (up to a certain amount) — government (FDIC) insured? When and broker-dealers were broker-dealers and it was clear that they were selling something to the customers that dealt with them? When private banks had to act in their client’s best interest? And when insurance companies sold life insurance and didn’t pretend to be advisors, laying high-cost annuities on anyone who is naive enough to buy them?
This story in The FInancial TImes on surprise losses from trading at JPMorganjust reminded me how much I miss those days before the repeal of Glass-Steagall, the depression-era law that separated banks from broker-dealers. I think Paul Volcker is correct, that bringing back Glass-Steagall and separating banks, brokers and insurance companies would be in the best interest of most Americans. Short term, banks would feel some pain from being separated from the high-fee high-revenue broker-dealers that they are merged with now, but longer term they could do very well by adopting a fiduciary culture once more and putting their clients needs first, lending directly for mortgages and businesses, and helping people save.