A Move to Revive Glass-Steagall
Ten years ago, Congress dismantled the decades-old Glass-Steagall Act, breaking down the firewalls between commercial banks and securities houses, and helping Wall Street firms grow into the too-big-to-fail institutions that exist now. There’s been a great deal of debate about the extent to which the death of Glass-Steagall contributed to the global economic collapse that plagued the past two years — not to mention the trillions of dollars in government bailout cash that were required to stabilize the nation’s banking system. But some House Democrats place the blame squarely on the repeal of Glass-Steagall, and today they introduced legislation to reinstate it.
“[The repeal] was a recipe for disaster because these banks were empowered to make large bets with depositors’ money and money they didn’t really have,” Rep. Maurice Hinchey (D-N.Y.), who sponsored the new bill, said in a statement.
When many of those bets, particularly in the housing sector, didn’t pan out, the whole deck of cards came crumbling down and U.S. taxpayers had to come to the rescue. The absence of the protections in the Glass-Steagall Act essentially turned these financial giants into quasi-government entities because they were only able to survive the recent collapse with government assistance.
Hinchey’s proposal would force the giants of Wall Street to choose whether they wanted to be commercial banks or investment houses, but they couldn’t be both. (A simple lender, for example, couldn’t also be an underwriter.) Co-sponsors include Democratic Reps. John Conyers (Mich.), Peter DeFazio (Ore.), Jay Inslee (Wash.) and John Tierney (Mass.).
The House Rules Committee will meet Tuesday to consider the proposal before it can move to the chamber floor as part of a larger tax bill the Democrats have to pass by the end of the year.