Lets be specific. Prior to the repeal of Glass-Steagall, banks were not permitted to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations.
... or that the "banks" and government entities such as VA and FHA that were reselling these mortgages (in bundles or singles) were not called "banks"?
... and that the problem were not GSEs that were buying (and in large part were the final "resting place" of) the products and the CRA and other loose mortgage and credit government policies of making "banks" lend to people who would not otherwise eligible for the loans (because FNM and FRE and GNMA guaranteed buying the loans as long as their parameters were met) so that "credit risk" to originator didn't make any difference?
A fast primer : The Role of Securitization in Mortgage Lending"
Like I said, "The names may have changed, but the game stays the same."
Let's try this again :
Reinstated Glass-Steagall will not do anything to any of the above securitazation, the capital that would otherwise go to the banks will go to other entities, not called "banks" (Saving and Loans / Thrift and Loans, Credit Unions, Loans 'R' Us, maybe?) as long as mortgages can be resold to the likes of Fannie/Freddie/Ginnie and that government demands the loans to be made, while starving the "new" consumer banks of capital and margins (which consumer will have to make up for in various fees and higher interest rates, thus again hating the "new" consumer banks and bankers and pining for "good old days" of banking). All courtesy of "new" government regulations, brought to us by the likes of Johnny Mac (John McCain). What piece of legislation are we going to blame then?
Repealing and reinstating a nonsense piece of legislation - that has never done what it was set out to do, from day one until repeal - will not change the facts of how the mortgage "industry" operates today (almost entirely controlled and now half-owned by the government), only who gets to make and keep the money and who will eventually be liable and pay for it.
And again, from my post, here's what FDIC's Chair Sheila Bair, which is broke already, wants done today (banks' safety or banks' loans regardless of safety): Enough said about where they stand on that?
Repeal of Glass-Steagall was not the problem, reinstatement is not the solution, in fact more regulations, while risk-free incentives are unchanged or greater than before, will lead to more problems. Federal Deposit Insurance Corp. Chairman Sheila Bair said she’s “concerned” that U.S. banks are making only the safest loans, and encouraged the companies to step up their pace of lending. .....
And while Fannie and Freddie are gobbling up more taxpayers money, politicians are pointing fingers to blame the repeal of G-S, so we can avert our eyes from real problems, caused by them - http://www.freerepublic.com/focus/f-news/2411007/posts?page=7#7