Glass-Steagall Is Still Needed

Abstract

Among the many problems facing the next president in January is the instability of U.S. banking and financial institutions. One only needs to read the daily press to discover the extent of the turmoil. The problems of the thrift industrysavings and loan associations and savings bankshave become a national scandal. • The Federal Savings and Loan Insurance Corporation (FSLIC) is technically insolvent and lacks the resources to close down hundreds of insolvent thrift institutions. • The number of commercial banks on the federal regulatory problem list has increased from 196 in 1980 to over 1,455 in 1988. • The difficulties in the past few years of large institutions such as Continental Illinois Bank, First RepublicBank Corporation, and Financial Corporation of America (not to mention the problems of BankAmericaoften perceived as the pillar of American banking) have been well publicized. • Two state deposit insurance corporations have failed and the Federal Deposit Insurance Corporation (FDIC), the agency that insures bank deposits up to $100,000, will incur a loss in 1988the first in its 54year history. • In 1988 alone, over 200 U.S. banks will fail, compared to an annual average of less than ten in the 1970s. • The unsolved issues of bank loans to Third World