Doug Henwood said:
> This may be a tad overstated, but there's a point here. Most leftish
> Americans cling to a faith in the virtues of competition; certainly
> every Naderite hates bigness and monopoly and wants more antitrust
> and competition. But do we really want that? Do we really want to
> encourage atomization and the war of each against all?
Your overall point -- that having a 10,000 state banks bloom may not be better for the working class that having 10 national banks (kind of a "it's not the banking technology, it's how you use it" type argument) -- is interesting and worth considering. But I'm not sure how it's an objection to Glass Steagall. It's seems more an objection to the McFadden Act, the restrictions against braching across state lines. Which was effectively overturned by Riegel-Neal in 1994, no? Which is why are banking system is in the process of consolidation?
Also, I thought the preservation of 10,000 tiny banks was achieved not by increasing but through diminishing competition -- by giving every little state bank and S&L a piece of territory and a kind of business it could call its own, so that it could have a safe steady income and enjoy the pleasures of 3-6-3 placidity. Which doesn't strike me as an antitrust-type argument of the sort that increasing competition is good. Rather it seems the "localism is good" argument was married to the idea "banks that take deposits shouldn't be taking risks" -- i.e., shouldn't be competing, and shouldn't have to worry about someone stealing their lunch. My understanding was that the presence (until recently) of lots of banks was evidence of the lack of competition rather than the presence of vigorous competition -- that inefficient banks were remaining in business because their customers couldn't find a conveniently located branch of another bank in which to conduct their business.
I thought Glass Steagall, for better or worse, was about something else entirely, namely the idea that banks got cheaper funds because they were federally guaranteed, and if they were able to funnel these into stocks, the government insurance fund -- i.e., the taxpayers -- would be underwriting much bigger risks than they'd bargained for. Maybe that's all wrong because diversification, properly regulated, actually lowers risk; and maybe it's moot because banks do even riskier things now off the balance sheet. But it doesn't seem to be an argument about consolidation so much as an argument about whether such a move increases the riskiness of depositary institutions, and hence the risks underwritten by the system insurance and ultimately the taxpayer.
Michael __________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com