Something sure to get Simon Johnson's heart pumping: Via the Journal's Real Time Economics blog, I see that John Reed, the man who helped deliver the coup de grace to the Depression-era law against combining commercial banking with investment banking and insurance, now wants to bring it back. (In 1998, Citicorp, run by Reed, merged with Travelers, essentially an insurance company that also owned the investment bank Salomon Smith Barney. But the merger was more or less conditional on the law being repealed, which Reed and Travelers CEO Sandy Weill then successfully lobbied for.) Here's what Reed wrote last week in a New York Times letter-to-the-editor:
As another older banker and one who has experienced both the pre- and post-Glass-Steagall world, I would agree with Paul A. Volcker (and also Mervyn King, governor of the Bank of England) that some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense.
This, in conjunction with more demanding capital requirements, would go a long way toward building a more robust financial sector.
Wow. Maybe the concensus on this really is starting to change.