The 21st Century Glass Steagall Act

Discussion in 'Politics' started by Earth Wind and Fire, Dec 18, 2013.

  1. Earth Wind and Fire

    Earth Wind and Fire
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    Taken from an article by Elizabeth Warren

    When I learned last winter that I would have a seat on the Senate Banking Committee, I was very happy because I knew it would give me the opportunity to ask tough questions and push for some accountability from Wall Street and its regulators. In the last six months, that’s exactly what I’ve tried to do.

    Again and again, I’ve been making a simple point to anyone who will listen: we need to learn from the financial crisis of 2008 and, moving forward, to prevent the kinds of high-risk activities that made a few people rich but nearly destroyed our economy.

    Now it’s time to launch the next push. I joined forces with Senators John McCain, Maria Cantwell, and Angus King to introduce the 21st Century Glass Steagall Act of 2013 to reinstate and modernize core banking protections.

    Banking should be boring. Savings accounts, checking accounts — the things that you and I rely on every day — should be safe from the sort of high-risk activities that broke our economy.

    The way our system works, the FDIC insures our traditional banks to keep your money safe. That way when you want to withdraw money from your checking account, you know the money will be there. That’s what keeps our banking system safe and dependable.

    But the government should NOT be insuring hedge funds, swaps dealing, and other risky investment banking services. When the same institutions that take huge risks are also the ones that control your savings account, the entire banking system is riskier.

    Coming out of the Great Depression, Congress passed the Glass Steagall Act to separate risky investment banking from ordinary commercial banking. And for half a century, the banking system was stable and our middle class grew stronger. As our economy grew, the memory of the regular financial crises we experienced before Glass Steagall faded away.

    But in the 1980s, the federal regulators started reinterpreting the laws to break down the divide between regular banking and Wall Street risk-taking, and in 1999, Congress repealed Glass Steagall altogether. Wall Street had spent 66 years and millions of dollars lobbying for repeal, and, eventually, the big banks won.

    Our new 21st Century Glass Steagall Act once again separates traditional banks from riskier financial services. And since banking has become much more complicated since the first bill was written in 1933, we’ve updated the law to include new activities and leave no room for regulatory interpretations that water down the rules.

    The bill will give a five year transition period for financial institutions to split their business practices into distinct entities — shrinking their size, taking an important step toward ending “Too Big to Fail” once and for all, and minimizing the risk of future bailouts.

    When people like you and me work together, we can stand up to even the most powerful interests. That’s how we got the Consumer Financial Protection Bureau in 2010. And that’s how we’ll pass the 21st Century Glass Steagall Act.
     
  2. preachinjesus

    preachinjesus
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    You'll not find a more passionate advocate for a free market economy among my friends and colleagues than me, and I'm in favor of this common sense regulation.

    The greatest threat to our way of life as a nation isn't terrorists, China, or any kind of militaristic regime...it is the destructive habits of so many banks that have strapped themselves into our economy and become, by sheer force of their economic activity, the primary motivators of economic activity.

    Since the recession in 2008 no significant banking regulation has been passed to correct the astonishingly bad economic policies that led to the near default of our overall economy. At this point, all of the conditions for another economic fall like 2008 still exist within our economy and banking/securities sectors. Nothing has changed and it is dangerous.

    You know what is really interesting about the 2008 collapse? Commercial banks (the ones driving the economy right now) failed at three times the rate as localized credit unions.

    One primary reason is that credit unions still operate under the (most of) the same principles as banks did prior to the repeal of Glass-Steagall. They are substantially more stable financial institutions whose primary drawback is minimal size and less than sexy performance in peak years.

    We need to require the separation of banking and commercial investing activities in banks. This is what this kind of common sense financial regulation would accomplish.

    And I'm saying as someone who absolutely supports a economic view closer to von Hayek than Keynes.
     
  3. Earth Wind and Fire

    Earth Wind and Fire
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    Totally agree:thumbs:
     
  4. OldRegular

    OldRegular
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    I have thought for years that Congress made a huge mistake when they turned the banks loose. The debacle of 2008 proved I was correct!
     

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