As the world speculative financial system disintegrates, Lyndon LaRouche's demand to reenact Glass-Steagall is being recognized by even leading financiers as the only solution, and simultaneously, the "death ray" for speculative banking.
U.S. Treasury Secretary Tim Geithner, a spokesman for the doomed order, told Bloomberg News on April 26 that the repeal of Glass-Steagall "didn't play a material role in the causes of our financial crisis. I know that view is not widely accepted in many places," Geithner said in response to a question after a speech in San Francisco. "A huge amount of risk built up outside our banking system, outside the safeguards and protections we put in place in the Great Depression," Geithner said. "That risk and leverage grew up, built up, very substantially, and when the storm hit, it put enormous pressure on a part of the system that provided about half the credit to the American economy. Nothing to do with Glass Steagall." Bank risk and leverage? "Nothing to do with Glass-Steagall"!
Geithner has fellow "Glass-Steagall deniers" around the world. EIR talked to Andreas Schmitz, the HSBC President of the German Banking Association, at its event in Berlin on April 26. In his press conference the previous week, Schmitz had ruled out any "bank separation" from speculation as a policy for Germany. Schmitz reiterated his opposition to EIR this week, claiming that the German banking tradition had created such a "complicated" structure that one could simply not separate bank operations. Separating speculative from commercial banking would make the refinancing business impossible, Schmitz said.
As for the discussion in France about regulations, Schmitz told EIR that if Hollande were elected President there, it would very soon turn out that he would not be able to carry out his campaign promises of new banking regulations. The reason? Because if one examines the banking structure of France, it is clear that separation of the speculation and commercial banking is not possible. "In France, they also only boil with water," Schmitz claimed.
After ruling out Glass-Steagall for France and Germany, Schmitz told EIR that a return to some aspects of Glass-Steagall couldn't be ruled out for the U.S., because excesses there have dwarfed those in Europe, and the U.S. public is outraged. Unprompted, Schmitz then declared that something had to be done to control shadow banking, because it poses a huge risk! The only name for the "something" is Glass-Steagall.