*We thank Howard Bodenhorn, John Bonin, Alejandra Edwards, Nahum Gross, Giora Hanoch, Shlomo Yitzhaki, and two anonymous referees for helpful comments; the Maurice Falk Institute for Economic Research in Israel for financial support; and Yoram Inbar, Liron Ben Tovim, and Josh Stevens for excellent research assistance. Grossman thanks the German Marshall Fund of the United States and the National Science Foundation for financial support. The views expressed in this paper are not necessarily those of the Bank of Israel.
WHO NEEDS GLASS-STEAGALL? EVIDENCE FROM ISRAEL'S BANK SHARES CRISIS AND THE GREAT DEPRESSION
Version of Record online: 29 JUN 2007
Contemporary Economic Policy
Volume 16, Issue 2, pages 185–196, April 1998
How to Cite
BLASS, A. A. and GROSSMAN, R. S. (1998), WHO NEEDS GLASS-STEAGALL? EVIDENCE FROM ISRAEL'S BANK SHARES CRISIS AND THE GREAT DEPRESSION. Contemporary Economic Policy, 16: 185–196. doi: 10.1111/j.1465-7287.1998.tb00511.x
- Issue online: 29 JUN 2007
- Version of Record online: 29 JUN 2007
This paper compares bank share manipulation in Israel with that in the United States prior to the passage of the Glass-Steagall Act and uses the comparison to assess the desirability of restricting the investment banking activities of commercial banks—not only in the United States and in Israel, but also in the economies in transition (EITs) of Eastern Europe. Many of the techniques of and motivations for manipulation were similar. However, because of their larger relative size, banks in Israel, were far more successful in eliminating market risk. The paper concludes that Glass-Steagall restrictions could prove a useful policy prescription in Israel, the EITs, and elsewhere in the developing world.