Posted by AzBlueMeanie:
A bipartisan group of Senators are proposing the “21st Century Glass-Steagall Act”
in an effort to curb the power of big banks by reinstating a
Depression-era rule that separated commercial and investment banking.
Senators Elizabeth Warren (D-MA), John McCain (R-AZ), Maria Cantwell
(D-WA), and Angus King (I-ME) proposed the bill on Thursday. Think Progress reports, Elizabeth Warren Vows To Break Up Big Banks With Major New Legislative Push:
Enacted during the Great Depression, the Glass-Steagall Act prevented
commercial deposit banks, which are insured by taxpayer money through
the Federal Deposit Insurance Corp (FDIC), from engaging in insurance
and risky investment activities. These restrictions were repealed in
1999. The new bill would reinstate and update the separation between
commercial and investment banking, giving financial conglomerates a
five-year transitional period to split up their businesses to come into
adherence with the firewall.
“Banks should be boring,” Warren argued in her initial public push for the bill,
her first major banking measure in the Senate. The bill is more than a
mere a reinstatement of the original 1933 Glass-Steagall Act, however.
It would also bar commercial banks from some of the newer, more complex
practices that they became infamous for in the wake of the recession,
including trading complex derivatives and swaps or engaging in hedge
fund and private equity activities. Warren explained in a conference
call with reporters on Thursday that the new bill also seeks to close
loopholes created by regulators’ interpretation of the original bill in
the 1980s and 90s preceding its repeal.
The repeal of Glass-Steagall allowed banks to expand rapidly in size, to a stage where the top 0.2 percent of banks control nearly 70 percent of all banking assets. Even after the 2008 financial crisis, the biggest banks continued to grow. Lawmakers from both sides of the aisle have criticized these banks for being not only too big to fail, but also too big for jail or for trial.
Support for restoring the banking firewalll has come from various
corners since the 2008 financial crisis. Nobel Prize-winning economist
Joseph Stiglitz argued at the height of the recession, that the repeal created a “high-risk gambling mentality.” Two former chairman of Citigroup, Richard Parsons and Sanford Weill — who once had a portrait of himself in his office called “The Shatterer of Glass-Steagall,”
have endorsed restoring the firewall. Citigroup, which was bailed out
during in 2008, was the first big beneficiary of the firewall’s repeal.
Even Rep. Paul Ryan (R-WI) has said that he agrees with reinstating the Glass-Steagall Act.
“Americans want safe banks,” Warren said when asked how she would
respond to opponents of Glass-Steagall. “The banks that handle their
checking and savings accounts should be rock-solid secure, and they
should not be juicing their profits by taking those insured deposits and
insuring them in wild financial schemes.” McCain echoed those comments in a statement,
adding, “If enacted, the 21st Century Glass-Steagall Act would not end
Too-Big-to-Fail. But, it would rebuild the wall between commercial and
investment banking that was in place for over 60 years, restore
confidence in the system, and reduce risk for the American taxpayer.”
* * *
Warren said that she believed this bill would succeed where others
failed because a bipartisan group of senators are willing to fight for
it publicly. “People said we could never get the consumer protection
bureau. But we fought for it, and now we have an agency protecting
consumers from credit card and mortgage scams,” she said on the press
call. “I’ve lived in this world where people say to me ‘You can’t do
this,’ and when they say that, I just say to them, Consumer Financial
Protection Bureau. We have done it.”
“I’ll be out there fighting, and here’ll be the fun part,” she added. “I’ll be fighting right next to John McCain.”
OK, Elizabeth and i define "fun" differently, but right on! Bring back Glass-Steagall, break up the banks, and prosecute the banksters of Wall Street. "Somebody's going to emergency, somebody's going to jail."