Posted on 07/09/2015 8:44:23 PM PDT by 2ndDivisionVet
Sens. Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) are reintroducing legislation to revive the Glass-Steagall Act, which would force big banks to split their investment and commercial banking practices.
Glass-Steagall was first passed in 1933 but repealed during the Clinton administration, leading many progressives to argue that it contributed to the 2008 financial collapse.
Warren and McCain, along with their cosponsors, Sens. Angus King (I-Maine) and Maria Cantwell (D-Wash.), said in a statement that the legislation would make big banks that are "too big to fail" smaller and safer and minimize the likelihood of a government bailout....
(Excerpt) Read more at thehill.com ...
It’s about damn time! What do you want to bet it go’s down by one vote?
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Depends on what the Chamber of Commerce tells the republican leadership to do.
Stopped clocks etc...
But this will never pass. There too many pols in both parties who feed at the trough provided by the Wall Street banksters.
[ Ok, I don’t know if this would be good or bad, but with these two as sponsors, I would be suspicious. ]
I wonder how much other crap would be attached to this bill like some sorta deformed Siamese twin from the pits of hell itself to countermand the effect of the actual bill and grow government in the process...
In addition, they need to restore the primacy of bank depositors’ claims on their funds in the event of banks’ bankruptcy, to put those claims ahead of the claims of derivatives counter parties and ahead of the claims of senior bond holders...
Craziness reins in banking...
Shortly after its adoption Senator Glass himself pushed for partial repeal of one of the most important provisions of the act.
The Glass-Steagall act was ground into fine powder over five decades, starting in the 1950's. By the time Gramm–Leach–Bliley rolled around it there were so many exploited loopholes in Glass-Steagall there was really no legal sense in which it remained in force. Blaming the de jure repeal of a law already progressively repealed de facto for a correction brought about by government interference in underwriting is an idea so stupid only John McCain, Elizabeth Warren and Michael Savage could all simultaneously be on board.
You don't mitigate risk by limiting the investments available to banks; in fact, that increases risk. And you can't make an arbitrary distinction between "types" of banks that no other country in the world makes and still expect to compete in a market where international corporations will simply brush you aside and deal with an institution that offers the full range of services.
Post hoc ergo propter hoc is no way to go through life, kids.
I also believe that some of the problems started when Investment Banks went from being partnerships to being publicly traded companies. The partners were a little more responsible when it was their own money being thrown around.
In essence, under Glass-Steagall and its associated regulatory regime, commercial banks were limited to making money through transaction fees and charges (think checking accounts) and through commercial lending to businesses with good credit and assets to pledge as security. These restrictions were enforced by overlapping state and federal banking regulatory agencies who closely examined the banks under their supervision.
In contrast, investment banking -- essentially Wall Street and few smaller regional players -- made money by underwriting stock and bond sales, investments, and trading in the markets on their own account. Wall Street was primarily regulated by the SEC and the Federal Reserve System.
Under Glass-Steagall, America's system of commercial banks was mostly safe and dull except for periodic spurts of bad lending to hot sectors of the economy. Meanwhile, the often booming stock market from the 1960s and on frequently generated massive fees and trading and investment profits for Wall Street's investment bankers. Commercial bankers jealously eyed that flow of revenue and looked for ways to tap into it.
By the 1980s, Glass Steagall seemed increasingly unnecessary and obsolete as court and regulatory decisions permitted commercial banks to undertake various investment banking activities. Arguably, this made for greater competition and benefitted customers, the public, and the economy at large.
Unfortunately, commercial and investment banking are different types of businesses that call for conflicting skills and practices. They are, so to speak, conflicting specialties, as different as flying airliners and driving race cars are despite that they both involve the control of machines in motion. Like airline pilots, commercial bankers should be risk averse, while investment bankers must be more like race car drivers in their aggressiveness and energetic opportunism.
After Glass-Stegall was repealed, Wall Street gradually accessed massive lending from commercial banks and other lenders to back increasingly complex derivative plays and ever-greater financialization of the American economy. This effectively made the banking system and the entire economy hostage to Wall Street's speculative bets.
Arguably, a return to Glass-Steagall makes more sense than the massive new financial regulatory system that was adopted after the 2008 collapse. Indeed, the best conservative response to the current bill may be embrace it and use it to argue for the repeal of FINRA.
> Glass-Steagall was first passed in 1933 but repealed during the Clinton administration, leading many progressives to argue that it contributed to the 2008 financial collapse.
It has also led to many leftists claiming to be conservatives on the internet wanting to bring it back.
Finally a good idea from an unlikely source. The repeal of Glass astragal allowed the investment bankers to play with ordinary depositors money
A that crap about “Chinese walls” between the two sides was just that
Thank you for the information. I’m still suspicious of this “bipartisan” effort to revive the Act because I wonder what “tweaks” these two sponsors may have come up with. These days congress can’t seem to pass a bill without a lot of BS attached to it.
I hope this would close the loop hole of 0 down on home loans and such.
That is where the problem resides. Forcing banks to loan money to people with no credit or pi$$ poor credit to walk in, borrow $200K with nothing down for a house and walk out the door because of their skin color is NOT light complected.
Then 5 years later the American Citizen is picking up the tab.
I doubt this bill will fix this problem. We will see.
Absolutely correct.......
Will this bill fix it?
I doubt it. To do so would go against all that is Government.
A high degree of caution is always in order as to strange dogs, car dealers, and Congress.
I’m not fan of McCain, but I hate bankers even more - considering what they did to this country for the past decade. Good luck on this, PUT THEM IN THEIR PLACE.
And sorry, NO! No one ‘forced’ bankers to dish out the hard-earned money of others to deadbeats - THEY DID IT ALL THEMSELVES, and gleefully.
If the government was really forcing them to give money to deadbeats, PLEASE, PLEASE send me a link where the bankers are on record as being forced to do so. I studied the issue real-time a decade ago and NEVER could find a single complaint from a banker. Not once.
Yikes—something I agree with them on!
Yup. Gamble all you want, but not with depositor’s money, and don’t ask taxpayers for a bail out if you gamble wrong.
Actually, you’re not correct. The banks were forced to make bad loans for decades.
They also did some underhanded things with mortgage securities, but they were forced to make bad loans—or get regulated out of business.
Then, if the bankers were honest people, they would have COMPLAINED about it - instead of just cashing in and leaving my kids to pick up the mess when the pyramid collapsed. I’m still waiting to be shown that was the case.
Sorry, nope, the regulators beat them up—didn’t approve acquisitions, threatened charters, etc—for not talking the PC talk on the loans.
It was largely Congress’s fault, though W and Clinton had their hands in it as well.
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