Finally, there’s a voice of reason in the mainstream press, the New York Times no less. Here is an opinion about banking and the Glass Steagall Act, saying it seems “miraculous.” It talks a little about the separation of commercial banking and investment banking and why that’s necessary, even today. It’s a small piece of history of how the banks were kept out of selling securities for 70 years, which kept them viable and stable.
The author, Joe Nocera, doesn’t talk about what killed the Glass Steagall Act in the recent era which was the Gramm-Leach-Bliley Act. The latter allowed your hard earned savings deposits to be used in the national and international gambling house of the derivatives markets and the hedge funds. Seriously, would you give your savings to a greedy criminal with a gambling problem? Well, that’s what the Gramm-Leach-Bliley Act legally allowed your bank to do with your money. Of course, they didn’t tell you they were doing that but these gamblers simply don’t “know when to walk away, know when to run.”
Now, although not in the article, there is a fight to bring back the provisions of the Glass-Steagall Act through Senator Marcy Kaptur’s bill H.R. 1489. It’s not certain weather it will pass this time as easily as this article shows how easily Glass-Steagall passed in 1933 under Roosevelt. The current president is a far cry from the stature of a Franklin Roosevelt, not to mention that Roosevelt fought against Wall Street; Barak Obama was put into office by Wall Street and is still courting them to get campaign money for his re-election bid.
“From my vantage point here in 2011, Glass-Steagall seems miraculous. It was amazingly radical, not just for its time, but for any time; it didn’t so much reform banking as upend it. Most notably, it ordered banks to get out of the securities business. As Sisson complained: “The effect of the proposed banking reform is to renounce investment banking rather than regulate it.” Because investment banking was then the chief activity of the big banks, this was a very big deal.
“Glass-Steagall also created the Federal Deposit Insurance Corporation, which insured customer deposits for the first time, and outlawed branch banking by national banks, among other things. It is impossible to imagine anything like it passing today; although the modern reform bill, Dodd-Frank, surely does some good, it’s not even comparable.”