Toro
Diamond Member
I am generally sympathetic to reinstating GS but the problem really wasn't GS. Even if commercial and investment banks were completely separate, the way MBS worked was that the buyers could put back the mortgages before a certain time if they became nonperforming. The banks originated the mortgages who sold them to the investment banks. The only really big bank to which the cross selling applied in a big way was Citi. Otherwise, it was Wachovia selling to Goldman, BofA selling to Lehman, etc. Then, when the loans started to fail, they started being put back to the banks. This had nothing to do with GS.
But the real problem was that Wall Street kept the equity pieces of CMBS, CDOs, etc on their balance sheets. So when the loans started to fail, like termites, defaults began to eat through the lower tranches of the structured products. I do not know why this would not have happened had GS been in place. Now, I think the OP is incredibly naive and devoid of understanding about how modern day finance works, but the repeal of GS had little to do with the Financial Crisis.
In the first sentence, I wrote "repealing" when meant to type "reinstating". I have corrected it.