Five House Democrats will call this week for a return to a Depression-era law that separated Wall Street investment banking from Main Street commercial banking.
If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation’s biggest — those now commonly referred to as “too big to fail” — would be broken up. The Obama administration opposes the measure.
The amendment’s five co-sponsors — Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts – want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of, among others, Larry Summers, now President Barack Obama’s chief economic adviser.
Gentlemen, you’re on the right side of this.
You can start reading here, then page back. There’s a lot of reading for you to do….. (this is the search results for all of my Tickers that have mentioned Glass-Steagall, of course.)
A FULL re-instatement of Glass-Steagall – not some watered-down piece of legislative trash, but the real deal – will prevent the economic meltdown we are in the middle of from ever happening again.
The key to such a fundamental re-balancing of our economy would be the restoration of the balance of credit, by making it impossible for those banks with access to the sovereign’s fractional reserve privilege to speculate with it.
Instead, lending would shift primarily to productive investment.
Glass-Steagall, in point of fact, was one of the primary reasons post-WWII that we came roaring forward with our economy. Lending went to finance productive assets (e.g. factories, machines, tractors, combines, etc) instead of financial speculation as it had in the 1920s.
It was that financial speculation that led to the asset bubbles in the 1920s – and that, in turn, resulted in the malinvestment that was responsible for The Great Depression.
It was that very same financial speculation in the 1990s and 2000s that led to the current bust, and contrary to the claims made by Bernanke, Geithner and others, the pain is not over, nor can it be until and unless the banks’ abuse of sovereign credit for financial speculation is prohibited.
If this amendment passes it will eviscerate Wall Street’s “profit gravy train”, but it will also usher in a productive explosion in America that we have not seen in the last 50 years.
You want to see jobs created by the millions and Americans return to work?
Pass this amendment.