I have previously written that bringing back some version of Glass-Steagall was a good idea, but just not right away. My argument was simply based on how tenuously (if at all) the financial markets were getting up off the canvas.
In a killer post yesterday, Jim Gobetz (Aiki14), posits that the timing of yesterday’s Volcker Rule, a vicious reincarnation of Glass-Steagall, may have been politically motivated…
From Market Sense:
Then there is the timing of the announcement. Is it so critical to the public good that it had to be presented in unfinished form? I do not believe so. Going on a crusade against these banks now serves only to further erode the public confidence in an already shaky market environment. Forcing these institutions to divest themselves in a hurried manor may result in a fire sale atmosphere as as any potential buyer will know the seller is under mandate to do so, and will make low ball offers potentially causing a devaluation similar to the one that occurred in derivative securities, and resulted in the very crisis this allegedly attempts to forestall. Market participants whose livelihood entails having an understanding of these events displayed their opinion of it by dropping the Dow Jones Industrial Average 213 pts today after a 122pt drop the day before.
It has led me to believe one, or perhaps both, of the following:
1) The President and his advisors have a staggering lack of sense with regard to the economy, the markets, and the effects their actions will have in the short and long term.
2) The President was engaging in a reprehensible act of political diversion, Setting the banks up as a Straw Man in order to deflect attention away from his parties loss in the Massachusetts Senatorial Election on Tuesday.
This is “Change”? This kind of nonsense could (almost) make you want to hit George W on his mobile, see what’s good, maybe he wants to check out a movie this weekend, hit up Avatar, oh wait, he already saw Avatar, but did he see it in IMAX? Not yet? Alright, let’s do this.