Italy Guns For Glass-Steagall-Type Law to Break Up Banks, Cut Bailout Costs for Taxpayers

I like the way they think. Way too much risk and power in one entity.

Rigged Game

The banking lobby and the ECB will have a cow.

On Friday, Italy’s coalition government unveiled new banking regulations that it hopes to pass in the coming months, including a rule that would separate banks’ commercial and investment arms. It would be the Italian equivalent of the Glass-Steagall Act, the 1933 U.S. law that separated commercial banks that took deposits, made loans, and processed transactions, from riskier investment banking activities. The law was designed to protect deposits. Its repeal in 1999 led to the consolidation of the U.S. banking sector, unfettered risk-taking by deposit-taking banks, and arguably the Financial Crisis just eight years later.

In Italy investment and commercial banks have been able to operate in unison since 1993, but that could all change if this new law is passed. Breaking up the banks would remove a lot of the risk, such as derivatives and other speculative instruments, from Italy’s…

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