Separate investment, commercial banking

The term “investment bank” is an oxymoron and should be replaced by “investment firm.” We have been advised by a major investment firm top executive under oath in a public forum that “what we do is risk management ... .”

This is not the core function of a bank. In effect, an investment firm performs a basic function of a New York Stock Exchange member firm or brokerage house. The vast size of Wall Street investment firms, abetted by the availability of depositor funds by ancillary commercial banking, insurance customers, etc., is the toxic differential that is the potential source of destabilizing the financial markets.

Gramm-Leach-Bliley (1999), endorsed by the Federal Reserve, was a reactionary maneuver to restore conditions that prevailed in the 1920s (pre Great Depression), with the disastrous results all too manifest today. Restoration of provisions of Glass-Steagall (1933-1999) that separated investment from commercial banking will remove a major flaw in the financial system.

Investment firms under the proper aegis of the Securities and Exchange Commission, and bereaved of commercial bank activities, should avert conditions leading to federal bailouts of billions and trillions of taxpayers funds. The status quo is untenable with the nation's indebtedness now on target to exceed 100 percent of annual gross domestic product within the next 20 months.

George Black

Iowa City