Monsters create risks

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Glass-Steagall law – ever heard of it? The law, named after Senator Carter Glass and Rep. Henry B. Steagall, was passed in 1933 in response to the Great Depression and the 1929 stock market crash. He banned US banks from trading in securities by accepting savings.

Over the years, the so-called separate banking system weakened more and more until President Bill Clinton finally buried it. We have experienced the consequences of this since 2007, when the biggest financial crisis since the Great Depression hit.

A separate banking system has also been a problem in Germany since the UBS bailout. As part of the too-big-to-fail rule for big banks, which was hastily pushed through parliament by then finance minister Evelyn Widmer-Schlumpf, SP and SVP representatives in particular urged big banks to pull out of investment banking.

Unforgettable was the 2009 press conference where SVP pioneer Christoph Blocher, SP president Christian Levrat, and Swatch founder Nicholas Hayek jointly formulated a demand to clip the wings of big banks.

It’s a pity they couldn’t agree on a common approach, when in fact they were pursuing the same end goal: the spin-off of investment banking. It hasn’t gotten to that point: instead, the big banks should increase their share capital and develop contingency plans to at least bail out Swiss business in the event of speculation in the “too big to fail” investment banking industry. Swiss economy.

Of course, now you can point the finger at all the CS bosses who, despite losing billions, received generous bonuses. Someone expected something else? Didn’t we all know that you can make a lot of money in investment banking, but you can also lose a lot of money, so many billions of francs that the bank can collapse? Are the loud-mouthed politicians in Bern also to blame for passing the inappropriate “too big to fail” law?

“It is scary to know that there are two global banking monsters in the country and we may have to pay the bill for their imperfect control.” This verdict could already be read in the Berner Zeitung on January 26, 2008, after the dealer of the second largest French bank, Société Générale, freed his employer from 8 billion Swiss francs in a coup d’état. Nota bene, this was before the UBS bailout.

And now? Now we no longer have two banking monsters, but only one: “The zombies are gone, but the monster appears,” commented NZZ. Monsters create risks. We know it. The current “too big to fail” legislation is not working. We know this too. Will the Bundesburn draw the right conclusions, at least this time? Hope dies last.

Source: Blick