FDIC Board Member Calls for Return of Glass-Steagall

Sounds like a plan.

A revival of the Glass-Steagall Act, the Depression-era law that separated commercial and investment banking, is “absolutely necessary” to protect the U.S. financial system, Federal Deposit Insurance Corp board member Thomas Hoenig said in a Bloomberg Radio interview.

Using Dodd-Frank Act powers to break up banks one-by-one is the wrong approach to removing the threat that risky trading could spark a repeat of the 2008 credit crisis, Hoenig said today on “The Hays Advantage” with Kathleen Hays.

The Glass-Steagall act was passed in the wake of the catastrophic 1929 crash of Wall Street and created an air-gap between the commercial and investment banking sectors.  I wrote about this exactly a year ago when the FDIC increased capital reserve requirements for banks.