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Wednesday, December 16, 2009

Economy Cantwell: Break Up the Banks

Posted by Eli Sanders on Wed, Dec 16, 2009 at 10:10 AM

Sen. Maria Cantwell has teamed up with Sen. John McCain to try to bring back a law from Great-Depression-times, the Glass-Steagall act.

For 60 years, the act forced a split between investment banking and commercial banking. Then, about 10 years ago, Congress repealed it, allowing investment banks and commercial banks to become part of the same business. It was a huge change, and it's partly responsible for the current economic mess.

Repealing Glass-Steagall meant that investment banks could use money from their commercial bank partners to make riskier and riskier bets on Wall Street—just look around and you'll see how that turned out.

"We need to rebuild the wall of Glass-Steagall so banks will stop diverting resources to Wall Street speculation and get back to more business lending to main street," Ms. Cantwell said.

Smart move for Washington's junior senator, who's rapidly become the leader of the reform-minded left on this issue.

Meanwhile: John "the fundamentals of the economy are just fine" McCain? You've come a long way, Senator.

Comments (14) RSS

Oldest First Unregistered On Registered On Add a comment

It's a sage rollback. There was a reason why it was signed into law once and kept in place for decades.

"Fool me once, shame on me-you, fool me twice . . . you won't fool me again." Who said that again? Gosh, I forget.

Posted by Telsa Grills on December 16, 2009 at 10:14 AM

Imitation/flattery etc.

Posted by Publicola on December 16, 2009 at 10:17 AM

Maria is right on.

Trust bust the big banks and set free the capital!

Posted by Will in Seattle

on December 16, 2009 at 10:18 AM

The Senate is so corrupted at this point I doubt any real change will be possible.

Posted by Vince on December 16, 2009 at 10:19 AM

Keep in mind that the Glass-Steagall Act, which created the conditions for the current financial collapse, was signed into law by Democrat Bill Clinton. Maria is merely playing the role that the Democrats have historically played. Bill deregulated, George looked the other way while banks went wild, and now Maria is hoping to "fix things". In the meantime, homelessness among middle class families is rising to historical levels. Will we get bailed out? Only if we fight for it.

Posted by Norm D Plume on December 16, 2009 at 10:25 AM

Oh, God yes, bring back Glass-Steagall. Dumping it is one of the major causes of the implosion, and one of the key reasons I'm convinced it's going to happen AGAIN, and soon, the next time a derivatives trader sneezes.

You can't stop investment bankers from doing their thing. But you can stop them from infecting everybody else.

Posted by Fnarf

on December 16, 2009 at 10:26 AM

best news of the year.

Posted by Matthew Richter

on December 16, 2009 at 10:34 AM

If Glass-Steagall repeal was "one of the major causes of the implosion" why did specialty investment and trading houses, e.g. bear stearns, lehman, lead the collapse?

No, the major reason for the collapse was the invention of MBS, the decoupling of loan origination from substantive risk, and the false sense of wall street that they had a good handle on that risk. These things could have happened without the repeal of G-S.

Posted by fao on December 16, 2009 at 10:34 AM

Who ditched Glass-Steagall? Reagan or Clinton?

Posted by SpecialBrew on December 16, 2009 at 10:42 AM

@9 Neither. That would fall on the Republican Congress in 1999, when Clinton happened to be president.

Posted by UNPAID COMMENTER on December 16, 2009 at 10:57 AM

@9, but Billy didn't do anything to stop it.

But seriously, they can't do healthcare reform so don't hold your breath for this one.

Posted by Cato the Younger Younger on December 16, 2009 at 12:00 PM

@10 Clinton also "happened" to sign it into law. So yeah.

Posted by Rotten666 on December 16, 2009 at 12:04 PM

Yeah, but Bill was never a liberal. He was a DLC Democrat, AKA Corporate Whore. So yeah, he did a lot of stupid things. Had a Republican been in office, the same or worse. Excuse me, way worse- see Bush.

Posted by gttim on December 16, 2009 at 12:13 PM