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Petition to reinstate the Glass-Steagall act

Remember those billions of dollars spent rescuing banks that were “too big to fail”? Well, the reason we don’t want to those banks to fail is because everyone keeps their money there. After the great depression, lawmakers saw a need to separate the investment money (the money that was spent on speculation and that had a chance to be lost) with individual savings and checking accounts. The result was that if a big investment bank made a risky investment (say, if they lost a bunch of money on complex derivative bets) a savings bank wouldn’t crumble. The bank could fail and the investor lose money without harming the public. This law was called the Glass-Steagall act, and it was repealed in 1999 with a Republican congress and signed by Clinton. This basic separation of investment vs. commercial banks is a vital part of keeping “too big to fail” out of our economy. 

Last year (and the year before), I mentioned my incredulity that Obama opposed reinstating this rule:

Obama administration officials have dismissed the idea that the financial sector should or can be changed in more fundamental ways than they are now proposing. You can’t turn back the clock, they say, and the new requirements they plan to impose on big banks to hold more capital in reserve, put up $150 billion for a rainy-day rescue fund, and disclose more of their risky trades should be enough to keep the financial sector from imploding again. Many of these requirements, among others, are contained in two giant bills making their way through Congress—one that passed the House last week and another that will be debated in the Senate in the new year. “I think going back to Glass-Steagall would be like going back to the Walkman,” says one senior Treasury official.

Here’s another good description of the Glass-Steagall act’s importance:

The Glass-Steagall Act was enacted to remedy the speculative abuses that infected commercial banking prior to the collapse of the stock market and the financial panic of 1929-1933. Many banks, especially national banks, not only invested heavily in speculative securities but entered the business of investment banking in the traditional sense of the term by buying original issues for public resale. Apart from the special problems confined to affiliation three well-defined evils were found to flow from the combination of investment and commercial banking.

I’ve linked to a petition to reinstate this important separation of the Glass-Steagall act. If you are concerned with corruption on Wall Street or exploitation of the taxpayer by the 1%, please sign this White House petition.

Filed under Glass-Steagall occupy Wall Street banking too big to fail petition

  1. crunchybytes reblogged this from chromatichouse and added:
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  4. trivializingthetrivial reblogged this from diegueno and added:
    "Too big to fail", that always seemed counter to the very American "The bigger they are, the harder they fall"
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  8. carlbgood reblogged this from jonathan-cunningham and added:
    thanks Jonathan! want a mechanism for real change, this legislation is it. it’s protected society from speculation since...
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    And write to your candidates. If you are not sure who they are visit Project Vote Smart.
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