by Countable | 4.7.17
Following recent drama in the Senate, where Republicans invoked the "nuclear option" to advance Judge Neil Gorsuch’s nomination to the Supreme Court, fears have arisen that the days of bipartisanship in the Senate may be dead. Recent talk by Trump administration officials about the possible revival of the Glass-Steagall Act may provide an opportunity for lawmakers to restore a sense of across-the-aisle cooperation.
Gary Cohn, senior White House economic advisor and National Economic Council director, met privately Wednesday with the Senate Banking Committee. In the meeting, Bloomberg reported that Cohn expressed his support for policy that would separate consumer banking from investment banking. This separation was a key part of the Glass-Steagall Act, which was functionally repealed under then-President Bill Clinton in 1999. Some industry experts point to the neutering of Glass-Steagall as a contributing factor in bringing about the 2008 financial crisis, though others have disagreed.
Cohn’s advocacy for the revival of this classic financial regulation was surprising to some since he is a former executive with Goldman Sachs, one of the institutions that would be most affected. But the revival of Glass-Steagall made it into the Republican party platform coming out of the RNC convention in July 2016, along with a commitment to repeal the Dodd-Frank Act. Cohn’s statements are consistent with the administration’s perspective.
The Dodd-Frank Act arose after the 2008 financial crisis. It was a vastly complicated piece of legislation meant to regulate the banking industry while protecting consumers and the economy. Institution of those regulations, however, has stalled repeatedly since its approval in 2010. Given the relative simplicity of the Glass-Steagall regulations, compared with the hundreds stipulated by Dodd-Frank, reinstating the first while eliminating the second would fulfill President Donald Trump’s promises to reduce federal regulation while still fundamentally changing the current financial industry.
The revival of Glass-Steagal makes allies of Republicans and more progressive members of the Democratic party. In July 2015 Sen. Elizabeth Warren (D-MA) introduced the 21st Century Glass-Steagall Act of 2015, which proposed to reinstate the firewall between investment and lending banking. By separating the two activities, government protection through the Federal Deposit Insurance Corporation (FDIC) for risky financial ventures would be removed. This would address the issue of "too big to fail". Institutions on both sides of the equation could go under without causing such catastrophic economic fallout federal bailouts are required.
The legislation was co-sponsored by Sen. John McCain (R-AZ). At the same time, related legislation was introduced in the House, also with bipartisan support.
Despite the unusual bipartisan support for reviving an updated Glass-Steagall, the legislation has foundered in committee. But with the backing of the administration the issue may get infused with new life. And in a Senate that increasingly struggles to find common ground amidst partisan rancor, it may provide an opportunity to compromise and make constituents happy. In the new Washington the possibility is strong enough that the financial industry is taking notice.
Should Congress reinstate Glass-Steagall type separations in the financial industry? Tell your reps what you think using the "Take Action" button!
— Asha Sanaker
(Photo Credit: Wikipedia / Creative Commons )
Written by Countable
I made it my business to understand why the financial crisis occurred. I agree with former Treasury Secretary Tim Geithner, "the focus on Glass-Steagall is misguided. Other factors were more important in causing the 2008 crisis, such as bad mortgage underwriting, poor work by the ratings agencies and a securitization market gone crazy. All of that would have happened no matter the size of the big banks." Glass-Steagall was out of date. A new, up to date one would reduce risk but a lot more oversight is needed to prevent another crisis. YOU, my representatives, paved the way for the banking crisis to occur by supporting low regulation and little to no oversight. All in the name of making government work like business. The futures of millions of people were destroyed. I am still mad.
Th prospect of bi-partisan support for reinstating Glass-Steagall is one of the few positive things that I have heard in MONTHS! Please let this be true and move forward. You have my full support in working towards getting this legislation back in play, neutering it in 1999 was one of the dumbest things that this country has ever done.
This is something that I think both parties can support. I myself as a Republican support the Glass-Steagall, it is a no brainier. Everytime it is repealed, something bad happens, i.e the 2008 financial crisis..
Reinstating the Glass-Steagall Act would provide needed separation of consumer vs. investment banking. This makes it safer for both consumers and large banks.
It's about time some common sense is beginning to peek through. Get this out of committee and pass it asap before we have another financial disaster on our hands. Thank you Elizabeth Warren, I think you may have opened a crack in this wall!
What a great idea. Something we all can agree on. We don't want another financial meltdown like in 2008. Reinstating a modern Glass-Steagall would go a long way toward that goal.
Shame on you who voted for Republicans they work for the one percent wealth not the 99 percent poor who voted for them. Redeem yourselves and vote them out in 2018. Vote the republicans out locally and nationally so we people rule all people not the corporations.
Reinstall the Glass-Stegall Act!!!
I certainly hope so, it should have never been eliminated in the first place❗️
Return Glass-Steagall repeal the Dodd-Frank!
Corporate welfare is far greater then any public welfare. Corporations are paying employees low wages, which they in turn make them qualify for food stamps and housing. This is nothing but corporate welfare. Any protection for the public I am for!
Please support the reinstatement of Glass-Steagall! Americans want to know that their deposits are safe and won't be gambled with, and assurance that we will not have a repeat of the 2008 economic crisis!
Please support the passage of the Glasd-Stegall act to protect regular American's finances.
You should work to get this implemented. The repeal of Glass-Steagall is what allowed these banks to merge and become too big to fail. Time to fix it.
He better !
I hope so. Would go a long way in curtailing another economic meltdown.
Support Glass-Stegal. No excuses.
Put Glass-Steagall back in place. This a no-brainer to help avoid financial meltdowns like we had in 2007...and in 1929.