Elizabeth Warren, D-Mass., along with John McCain, R-Ariz.; Maria Cantwell, D-Wash.; and Angus King, I-Maine – who first banded together to introduce the bill in 2013 – said their new bill would be a modern version of the Banking Act of 1933 (Glass-Steagall) that protects American taxpayers, helps community banks and credit unions compete, and decreases the likelihood of future financial crises.
The senators noted that President Trump along with Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn (who noted his support in a Wednesday Bloomberg interview) have all voiced support for reinstating the walls between commercial and investment banking.
Both the 2016 Democratic and Republican party platforms also supported reinstating Glass-Steagall, which was repealed in 1999, the senators said.
All the senators noted their bill would separate “traditional banks that have savings and checking accounts and are insured by the Federal Deposit Insurance Corp. from riskier financial institutions that offer services such as investment banking, insurance, swaps dealing, and hedge fund and private equity activities.”
The legislation would clarify “regulatory interpretations of banking law provisions that undermined the protections under the original Glass-Steagall and would make ‘Too Big to Fail’ institutions smaller and safer, minimizing the likelihood of a government bailout,” the senators said.
“Despite the progress since 2008, the biggest banks continue to threaten our economy,” said Warren. “For fifty years, the original Glass-Steagall Act helped produce broad-based economic growth and avoid any major financial crisis. The 21st Century Glass-Steagall Act will re-establish the wall between commercial and investment banking and make our financial system more stable and secure,” adding that “it’s time to get it done.”
McCain added that “even with the thousands of pages of misguided and burdensome regulations imposed by Dodd-Frank in the wake of the 2008 financial crisis, there are indications that this culture of risky behavior continues today. That’s why I believe it is critical for Congress to reinstate the protections that separated main street banks and investment banks.”
The 21st Century Glass-Steagall Act of 2017 “would return banking ‘back to the basics’ and go far to restore Americans’ confidence in the banking system.”