Sen. Elizabeth Warren (D-MA) has reignited the fight to separate investment and commercial banks by introducing an updated version of the Glass-Steagall Act last month, reported the New York Times. For 80 years, the Glass-Steagall Act was successful in keeping banks under control and protecting the American public from Wall Street crime.
Warren and Sen. John McCain (R-AZ) reintroduced the 21st Century Glass-Steagall Act last month after the updated bill failed in the 113th Congress. The bill takes aim at the cozy relationship between commercial and investment banks, which was enabled when President Bill Clinton repealed the original Glass-Steagall Act in 1999.
“Shattering the wall dividing commercial banks and investment banks, a culture of dangerous greed and excessive risk-taking has taken root in the banking world,” said McCain. “Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits.”
Repealing Glass-Steagall was wrong. Economist Robert Reich said that before Glass-Steagall, Wall Street speculators were allowed to escalate the value of particular stocks before institutions would dump the stocks onto the market, causing share prices to plummet. Investors lost money, while the institutions got filthy rich. Glass-Steagall outlawed this practice because it took advantage of the public’s faith in the stock market and damaged the economy.
Hillary Clinton says she’ll “get tough” on banks and prosecute Wall Street criminals. However, she won’t push to reinstate Glass-Steagall. If Glass-Steagall remains repealed, it will only perpetuate more legalized crime on Wall Street. This must be fixed. Commercial and investment banks must be separated.