In this podcast from Tipping Points, Financial Crisis in the Banking Centre: Past and Present, I spoke with Prof Ranald Michie and Dr Folarin Akinbami about the effects of laws on banking in the US and UK.
The repeal of the Glass–Steagall Act in the US in particular has resulted in large controversy amongst economists and other financial researchers. Does the separation of commercial from investment banking help prevent financial crises from occurring? Interestingly, the Glass–Steagall Act was passed in the US during the Great Depression in response to bankers engaging in risky financial behaviour with depositers’ money, it was repealed not long before the recent financial crisis. But this doesn’t seem to have any direct connection with banking in the UK, although the influence of legislation in England cannot be denied as it allowed London to become one of the financial centres of the world. The bigger question is what short and long-term effects does government legislation have on banking and can it provoke or prevent a crisis?