I am breaking my unwritten rule to post just one new column each day to Charles Rowley’s Blog. The reason is that yesterday President Obama announced the first economic policy of his administration that I consider to be constructive for the well-being of the United States economy.
The President’s proposal to return, at least somewhat, to the Glass-Steagall Act of 1933 that governed financial institutions until its ill-advised final repeal in 1999, is well-justified. In our book Economic Contractions in the United States: A Failure of Government Nathanael Smith and I outline an economic case for separating FDIC-insured clearing banks from casino investment banks, strictly regulating the former, while allowing caveat emptor rules to govern the latter. Copies of our book were forwarded to the President’s economic advisors and also to Paul Volcker. We should like to think that the book played a minor role in the President’s policy thinking. In any event, his proposals are remarkably similar to those that we formulated, though his populist rhetoric was absent from our book.
I congratulate the President for good thinking on this important issue. I have not been slow to criticize him in these columns when, in my judgment, he has pursued poor policies. I do not intend to be slow in praising him when he defines excellent policy.
When the dust settles on his initiative, I shall return to discuss it in greater depth.