Page "Glass–Steagall Act" Paragraph 101

Hyman Minsky agreed financial instability had returned in 1966 and had only been constrained in the following 15 years through Federal Reserve Board engineered “ credit crunches ” to combat inflation followed by “ lender of last resort ” rescues of asset prices that produced new inflation.

Minsky described ever worsening periods of inflation followed by unemployment as the cycle of rescues followed by credit crunches was repeated.

Minsky, however, supported traditional banking regulation and advocated further controls of finance to “ promote smaller and simpler organizations weighted more toward direct financing .” Writing from a similar “ neo-Keynesian perspective, Jan Kregel concluded that after World War II non-regulated financial companies, supported by regulatory actions, developed means to provide bank products (“ liquidity and lending accommodation ”) more cheaply than commercial banks through the “ capital markets .” Kregel argued this led banking regulators to eliminate Glass-Steagall restrictions to permit banks to “ duplicate these structures ” using the capital markets “ until there was virtually no difference in the activities of FDIC-insured commercial banks and investment banks .”