July 7, 2015
Bill Would Bring Back Glass-Steagall Act
Public Citizen Endorses Restoration of Safe Banking Through a 21st Century Glass-Steagall Act
WASHINGTON, D.C. – Public Citizen enthusiastically endorses the 21st Century Glass-Steagall Act, reintroduced (PDF) today by U.S. Sens. Elizabeth Warren (D-Mass.), John McCain (R-Ariz.), Angus King (I-Maine) and Maria Cantwell (D-Wash.). Banks that use deposits insured by the Federal Deposit Insurance Corporation would be restricted to basic financial services such as loan-making and forbidden from investment activities, including derivatives speculation.
“Reckless banking caused the financial crash of 2008, which drained more than $12 trillion from the economy and cost millions of Americans their jobs, homes and life savings,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “This sensible legislation will help prevent a repeat calamity.”
The Warren-McCain bill restores and updates (PDF) the Depression-era law known as Glass-Steagall, which was passed in response to the 1929 crash. Congress repealed it in 1999.
“Banking should be boring,” explained Bartlett Naylor, financial policy advocate for Public Citizen’s Congress Watch division. “With the erosion of the 1933 separation between safe and speculative banking, however, bankers have used their government-guaranteed debt, also known as deposits, to make risky bets.”
The restoration of the 1933 wall of separation between investment and commercial banking has drawn support from the likes of John Reed and Sanford Weill. Reed and Weill were the architects of Citigroup, the bank that first breached this barrier.
“These veteran bankers understand from experience that mixing these businesses defied prudent management,” added Naylor.
Public Citizen’s 2013 report, “Safety Glass,” lists the numerous scholars, bankers and others who are calling for a restoration of Glass-Steagall. Presidential aspirants also have endorsed a return to Glass-Steagall. In addition to 2008 Republican presidential nominee McCain, former Maryland Gov. Martin O’Malley (D) and U.S. Sen. Bernie Sanders (I-Vt.) have called for a return to prudent banking.
More than 700,000 Americans have signed petitions calling for the restoration of Glass-Steagall.