A Repeal of the Repeal of Glass-Steagall?
The Huffington Post has two stories on various politicians and policymakers warming to the idea of breaking up big banks and possibly bringing back parts of Glass-Steagall, an act that prohibited companies from mixing insurance, commercial and investment banking functions that Congress repealed in 1999, making way for today’s megabanks.
Shahien Nasiripour reports that three Fed governors — heads of three of the Federal Reserve’s regional banks — support ending too big to fail by breaking banks up. “If there was a good way to do so, if you had a clear road map about how you were going to go about it, and why you were going to break them up in this particular way,” James Bullard, the head of the St. Louis bank, said he would support it.
And Ryan Grim reports that Republican legislators mentioned they might support the “Volcker Rule,” an proposal by former Fed President Paul Volcker to restrict proprietary trading, where banks make speculative bets for themselves rather than on behalf of customers:
“„“Sixty percent of all the banking assets are concentrated in ten banks in the country,” said [Sen. John Cornyn (R-Texas)]. HuffPost asked if he’d support what’s known as the Volcker Rule, an administration plan to split off risky trading done by banks for their own gain from standard commercial banking activities.
“„“Yes,” he said, “I think that’s one approach.”
“„Without prompting, he added: “Glass-Steagall, we need to look at that.”
“„“We all — I say we all, but almost all of us — made the mistake of repealing Glass-Steagall in 1999,” Sen. Johnny Isakson (R-Ga.) told HuffPost. “Some of the problems of the big banks were brought about by the blurring of the restrictions on where they could go. And they went into brokerage and they went into derivatives they went into lots of other things. Maybe we need to look back to that, but it’s hard to put the genie back in the bottle.”
But the bill proposed by Sen. Chris Dodd (D-Conn.) solves the too big to fail problem differently — by creating a $50 billion fund, paid for by banks, to cover the cost of resolving a failing bank and wiping out its shareholders and management — meaning such statements of support are likely too little, too late, even if they might be a more effective solution.
