Tom
Michael Pollak wrote:
> 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