The crash might have still happened. The point of Glass-Steagall isn't to prevent the crashes, but rather to insulate the deposit-taking part of a bank. Had Glass-Steagall or something like it been in place, there would have been no need to bail out Citi or BofA or even AIG. Here in the UK, we, the taxpayers, wouldn't be sitting on a corpse of RBS that can't be sold off, all thanks to Fred the Shred's efforts at subsidizing his grand capital mkts ambitions with depositor money. In fact, there probably would never have been an RBS, Citi or BofA in the first place, had G-S been in place. I am not sure how I am a "wealth redistribution type", whatever that is, but it doesn't really matter.
1) Which is what I was said. I don't see how GS being in place would have prevented the crash, unless you are telling me that these mortgage backed derivatives wouldn't have been created and the RE market wouldn't have gone on it's run.. i don't see how GS would have prevented either. 2) I'm aware, but the fact that deposits were being used for speculation/trade isn't solely what caused the crash, or even the primary reason. The i-banks like Lehman and Bear didn't have depositors, yet they were still heavily leveraged. 3) Agreed. 4) I thought you were but i could have you confused with like, tinfoil, or one of those guys. my apologies IF you aren't a 'fair share' obamanite. 5) edit: how do you figure AIG wouldn't have 'needed' to be bailed out?
Just to add to this discussion... IMO, the repeal of GS created the "arm's race" that set the stage for the 2008 crisis. Combine the consolidation of many regional banks with the supreme confidence of TBTF bailouts "i.e. 1998" and you are left with alot of bad actors.
But think about it for a minute. One of the main reasons WHY those two i-banks were such a problem was because their counter-parties were the TBTF institutions with the depositor's funds at risk. You don't think that was their ultimate bluff? The "cross-contagion" of even one bad actor with massive leverage that could infect every other institution that has exposure to them...
this is a very difficult calculus for me... because health and safety is a proper role of govt... but where does govt interference stop. California dems have really gone too far and screwed up the state... but I also know that if not for CA and other states instituting take you company down type tort laws... companies were selling exploding sodas... wheels that disintegrated... gasoline trucks that exploded. It is a calculus and even the left knows they have to stop legislating at some point. For instance George Will once noted on this tort safety issues... most of the serious accidents happen with left had turns... so why not just ban left hand turns.