Bring back Glass-Steagall? It was just a fleeting thought
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Bank of America Corp. CEO Ken Lewis caused a stir today when he appeared to suggest that investment banking and commercial banking should be separated, as in the days of old.
It turns out he was just trying to tell the public where to direct its ire against ‘banking’ in general: Hate those Wall Street bankers, but not the poor tellers in your local branch.
On his way with other big-bank chiefs to a meeting with President Obama, Lewis told reporters that he was planning to tell Obama that ‘commercial banks are the fabric of any community in which they operate and we probably need to separate the commercial banks from the investment banking activities,’ according to Bloomberg News.
For a moment, some on Wall Street had visions of BofA leading a charge to reimpose the federal Glass-Steagall Act, the Depression-era law that split banking and brokerage after the 1929-1932 stock market meltdown. Weakened over time by banks’ various incursions into investment services, Glass-Steagall was largely swept away by Congress in 1999.
That allowed BofA to buy Merrill Lynch & Co. late last year -- a deal that some BofA shareholders may wish had never happened, given that it forced the bank back to the government for another capital infusion in January because of unexpected Merrill losses.
Was Lewis today signaling a huge case of buyer’s remorse?
After the meeting with Obama, the BofA chief clarified his remarks in an interview on Bloomberg TV:
Lewis said he doesn’t advocate a legal division of commercial and investment banking and that his comments about separating the two referred to rhetoric and public perception. ‘I was talking about the rhetoric, not physically separating the two,’ Lewis said. ‘We have an investment bank, we have a commercial bank as well that is the fabric of every community in which it operates.’
BofA spokesman Robert Stickler offered further backtracking, telling Bloomberg that ‘Mr. Lewis was not talking about reinstating the legal separation of investment banking and commercial banking. He was talking about the perceptions that people have of the banking industry and how they need to understand there are different parts of the banking industry that are doing different things and need to be seen in different lights.’
So, stop giving those tellers a hard time, already.
-- Tom Petruno