June 19, 2013
Eighty Years After Glass-Steagall, the Need for Reinstatement Is Clear
Marcy Kaptur Bill and Public Citizen Report Call for Return of Risk Reduction on Wall Street
WASHINGTON, D.C. – Today, in the week of the 80th anniversary of enactment of the Glass-Steagall Banking Act of 1933, Rep. Marcy Kaptur (D-Ohio) joined with Public Citizen to appeal for a separation of banking and gambling, and a return to prudent banking.
Marking the anniversary, Public Citizen today released “Safety Glass,” a report that documents widespread support among experts for this responsible banking policy, and answers the arguments of skeptics. Kaptur’s bill, HR 129, the “Return to Prudent Banking Act of 2013,” would “revive the separation between commercial banking and the securities business” and help return the financial sector to the relative stability provided for decades by Glass-Steagall.
Eighty years ago, on June 16, 1933, President Franklin Roosevelt signed the Banking Act, also known as “Glass-Steagall,” after Sen. Carter Glass (D-Va.) and Rep Henry Steagall (D-Ala.). The law created deposit insurance, with the creation of the Federal Deposit Insurance Corporation (FDIC). In exchange for guaranteeing the deposits of bank customers, Glass-Steagall also directed FDIC banks to engage in socially useful activity, notably loan-making to businesses and consumers. Thus, it required the much riskier practice of investment banking to be done by unaffiliated companies. Over the century, Glass-Steagall was whittled away, until the Wall Street-supported Gramm-Leach-Bliley Act of 1999, signed by President Bill Clinton, finished it off.
“The Glass-Steagall protections are not outdated,” said Rep. Kaptur. “Wall Street opposed them in the 1930s just as much as they do today. But America desperately needs to restore a secure, dependable, and prudent banking system so we can get on with the job of job creation and protect the American people.”
Kaptur’s bill currently enjoys 65 co-sponsors from both political parties.
“A person familiar with current financial events who then reads history becomes discouraged,” said Bartlett Naylor, Public Citizen financial policy advocate and report co-author. “Since the repeal of Glass-Steagall in 1999, the problems of mega-banks such as JP Morgan today are the same that rudely visited America before Glass-Steagall was put in place – namely, allowing banks to gamble with investors’ hard-earned money and throwing the economy into predictable crises that require massive taxpayer bailouts.”
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