Have you ever heard of the Glass-Steagall Act? Glass Steagal prevented commercial banks from trading securities with their clients’ deposits and also created the FDIC as a guard against bank runs. Passed in 1933 as the Banking Act, Glass-Steagall was chipped away over the years and eventually repealed during the President Bill Clinton's Administration with the Gramm-Leach-Bliley Act of 1999. Some experts believe that the act’s repeal contributed to the 2008 financial crisis, and the law served as a basis for the Volcker Rule of the 2009 Dodd-Frank reform bill.
President Bill Clinton signed the Gramm-Leach-Bliley Act, in 1999. Shockingly, the new law had such a chorus of bipartisan support that it passed the Senate 90-8, with then Senator Byron Dorgan of North Dakota being one of the few senators who raised a red flag against it.
After numerous attempts to repeal Glass-Steagall spanning the Bush and Clinton administrations, President Clinton signed the Gramm-Leach-Bliley Act, in 1999 that repealed the provisions preventing banks from affiliating with security firms. The line between commercial and investment banking was already blurring by 1999 but the passage of Gramm-Leach-Bliley really accelerated the pace.
A lot of the commercial banks were trading in increasingly risky and complex securities, continuing to buy and sell mortgages, etc. Because of the instruments’ complexity and institutions’ vulnerable positions, many banks faced stark losses during the 2008 financial crisis. Commercial institutions received emergency loans from the Federal Reserve, and investment banks Goldman Sachs and Morgan Stanley were actually designated as bank entities so they could take advantage of those loans. The vulnerability of commercial banks, revealed by the crisis, has resurrected the debate over Glass-Steagall.
Joseph Stiglitz of the Roosevelt Institute, a Nobel Prize winner, was one of the most powerful voines speaking out about Glass-Steagall:
Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively…Investment banks, on the other hand, have traditionally managed rich people’s money — people who can take bigger risks in order to get bigger returns.
When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risk-taking.
Fortunately for all of us, Elizabeth Warren was elected to the U.S. Senate and became THE voice to bring back Glass-Steagall:
[Determining trading and hedging] is the strongest argument for a modern Glass-Steagall. Glass-Steagall said in effect that hedge funds should be separated from commercial banking. If a big institution wants to go out and play in the market, that’s fine. But it doesn’t get the backup of the federal government.
A lot has changed since the depression of 2008. Within the Democratic Party, there has been a huge shift, with the 99% movement galvanizing support for overhaul of the way our financials system works, coupled with outrage over the fact that the top 1% is growing richer day by day while millions of American fall out of the middle class.
So, where is Hillary Clinton in all of this? What are her views on bringing back Glass-Steagall? Will she publicly and strongly rebuke a huge accomplishment of her husbands as president?
Clinton has always had a strong record in support of Wall Street and she received tons of campaign cash from Wall Street in her U. S. Senate race, as well as her failed run for president in 2007 and 2008. But Clinton was off the radar by the time the financial crisis hit in 2008 and has said little publicly on where she stands on Wall Street reform. But it is time to find out.
Now, I acknowledge that Clinton will probably be the nominee in 2016. Someone always catches fire in Iowa and New Hampshire other than the presumptive nominee but even if that happens in 2016, the calendar after these first two states really favors Clinton in places like South Carolina and Nevada, with their large AA and latino populations.
But we need to hold Clinton's feet to the fire by asking her tough questions at forums and town hall meetings in Iowa and New Hampshire and beyond.
Adam Greene of the Progressive Change Campaign Committee has a plan to do just that:
Co-founder Adam Green says plans are already in the works to pressure Clinton from the left on Wall Street reform and Social Security, sending PCCC members to storm her early town hall meetings and using Warren — the Massachusetts freshman senator who is increasingly held up as the hero of the party’s left wing — as the guiding force of their movement.
We all need to participate in this effort to get answers from Clinton on financial reform and ask Clinton the tough questions and get specific answers as to what she believes, what she supports and how she expects to act as president.
And frankly, Elizabeth Warren needs to sit out the 2016 primary and not endorse Clinton, so we can get answers to these questions. I know she and Hillary are friends but an endorsement by Warren of Clinton during the primary could insulate Clinton on these issues.
Also, sign up to run as delegates from your state to the Democratic National Convention. Regardless of who you support for president, we need the voices of those who favor financial reform and the 99% movement to speak up and help adopt a platform that reflects our values. And for those of you who live in caucus states, you can have an especially big impact in 2016 so get ready! Remember, Clinton lost almost every caucus in 2008.
http://www.nerdwallet.com/...
http://www.nytimes.com/...
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