Government Intervention in Financial Markets: Stabilizing or Destabilizing?

Government Intervention in Financial Markets: Stabilizing or Destabilizing?
Robert L. Hetzel
Federal Reserve Bank of Richmond
P. O. Box 27622
Richmond, VA 23261
February 12, 200

What trade-offs does society face in creating a financial safety net to prevent bank runs? Or, as Senator Carter Glass put the issue during the Senate debate on the Banking Act of 1933 (the Glass-Steagall Act), “Is there any reason why the American people should be taxed to guarantee the debts of banks, any more than they should be taxed to guarantee the debts of other institutions, including the merchants, the industries, and the mills of the country?” [more]