Top 10 Reasons to Reinstate Glass Steagall

TAKE ACTION NOW - CALL YOUR CONGRESSMAN, CALL YOUR SENATOR, SUPPORT the Return to Prudent Banking Act of 2013.  Learn more here.

@SenWarren asks #Lew: How big do the biggest banks have to get before we consider breaking them up? http://t.co/W3EM5Gn6YS #GlassSteagall
— Glass-Steagall (@howtodoit1) August 27, 2013

The term Glass-Steagall usually refers to the set of rules that kept a savings-and-loan type bank from engaging in speculative, risky training with customers’ deposits. If a bank took deposits, it could not trade in anything other than government bonds; if it underwrote securities or engaged in market-making, it could not take deposits.

The motivation for this separation rested on alleged conflicts of interest. Glass and Steagall, as well as others, accused banks of partnering with affiliates which later sold securities to repay banks’ debts, or accepted loans from banks to buy securities. They also worried that banks engaged in risk-taking speculation, rather than investing in corporations to promote growth.

 Five provisions of the Banking Act pertained to this separation:

• Section 19: Federally chartered banks could not buy or sell securities, unless they were investment securities, government bonds or trades made on behalf of a customer. 
• Section 5(c): Glass-Steagall would also apply to state-chartered banks. 
• Section 20: Banks could not be affiliated with firms whose primary purpose was trading securities. 
• Section 21: If a bank did trade securities, it could not take deposits. 
• Section 32: Officers and directors of commercial banks (banks part of the Federal Reserve System)

Beyond a doubt there are more than 10 reasons to reinstitute Glass-Steagall, the infamous legislation from the 1930's put into place to regulate banks after the horrific abuses of the 1920's and beyond.  But simplicity sake, here are the 10 best reasons I can think.  Send your own to twistedpolitix at gmail when you have a moment.

1. Prevent systemic failures similar to those that occurred during the 2008 crisis by splitting the power and concentration of wealth into many hands
2. Split up the too big to fail and too big to jail banks
3. Prevent the bankruptcy of the FDIC since the next financial crisis will most certainly mean the loss of depositors money
4. Decentralize the wealth, assets liabilities and risk of the Big 5 banks that control 80% of all the assets in the United States
5. Breath life into local economies around the country by opening up new opportunities for local investment and local banking
6. Bring to light the deceptive practices of the Federal Reserve system and their charter members
7. End the deceptive practices of the big investment banks that have created over $700 trillion in derivatives and sold them to unsuspecting investors
8. Decentralize the creation and destruction of the money supply since it is fractional reserve banking that allows banks to lend money into existence.
9. Bring the hundreds of trillions of dollars in derivatives out of the dark and onto exchanges and back to reality. 
10. Eliminate the inherent conflict of interest from the massive banks that circumvent all stte and national laws while corrupting politicians, judges, and government bureaucrats with an infinite supply of money.   

TAKE ACTION NOW - CALL YOUR CONGRESSMAN, CALL YOUR SENATOR, SUPPORT the Return to Prudent Banking Act of 2013.  Learn more here.

No amount of training, compliance or regulation will solve basic conflicts between banking & dealing. You need to separate. #GlassSteagall
— Jim Rickards (@JamesGRickards) July 4, 2012

#GlassSteagall is “absolutely necessary” said @FDICgov board member Thomas Hoenig. http://t.co/buoGXRJn via @BW
— BoldProgressives.org (@BoldProgressive) July 3, 2012

Joseph Stiglitz of the Roosevelt Institute, a Nobel Prize winner, contended:

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. 

Senators Maria Cantwell (D-WA) and John McCain (R-AZ) advocated the return of Glass-Steagall as well:

So much U.S. taxpayer-backed money is going into speculation in dark markets that it has diverted lending capital from our community banks and small businesses.em) were barred from holding advisory positions in companies whose primary purpose was trading securities.

Remember too big to fail and too big to jail means that the Big 5 banks in this country are ABOVE the LAW!  TAKE ACTION NOW - CALL YOUR CONGRESSMAN, CALL YOUR SENATOR, SUPPORT the Return to Prudent Banking Act of 2013.  Learn more here.

This is not a left or a right issue.  This is COMMON SENSE!

Spend a little time to understand the issue and the it should be clear.

TAKE ACTION NOW - CALL YOUR CONGRESSMAN, CALL YOUR SENATOR, SUPPORT the Return to Prudent Banking Act of 2013.  Learn more here.

More Hope than Tragedy Awaits Us All if Glass-Steagall is Passed

Mine is signature 113,188 on this Petition to Reinstate the Glass-Steagall Act http://t.co/WfxCB9q1as via @moveon #GlassSteagall
— Sarah Reynolds (@Sarah__Reynolds) July 7, 2013

Background

Despite all the tragedy filling the airwaves these days, there is a glimmer of hope.  After many years of obvious deception, fraud, and blatant theft both by investment and commercial bankers, lawyers, and accountants, there could be a restoration of the banking sector to its original purpose and scale.

Paving the Way for Economic Crises

The Glass-Steagall Act was repealed in 1999 under pressure from Wall Streetbankers trafficking in bundled subprime mortgages, derivatives, collateralized debt obligations, credit default swaps and the like. Inventing evermore exotic investment vehicles, the money movers pumped up a global financial bubble that eventually burst.

Officially it was blandly named the Banking Act of 1933 but around the world it is better known as Glass-Steagall, the ground-breaking piece of legislation that prevented commercial banks which took deposits from embarking on risky trading activities.

Carter Glass and Henry Steagall were the revolutionaries of the time. The years after the Great Depression sparked a debate in the US about how to prevent such devastation hitting the economy again, after nearly 5,000 banks collapsed.

Glass-Steagall forced commercial and investment banks to separate. Commercial banks were not allowed to underwrite the sales of stocks and bonds, while investment banks could not take in deposits from customers.

It remained in place for half a century before it was repealed in 1999 through the Financial Services Modernisation Act, again better known by the names of the politicians who promoted the legislation – Gramm, Leach and Bliley.

Since 1999, banks have been allowed to use commercial deposits and assets as fuel for securities trading on the derivatives market. Because commercial and speculative assets are so heavily comingled, the government is forced to protect the assets of banks making risky bets through near perpetual bailouts and purchasing of toxic debt.  It was the derivatives bubble that blew up the system and bankrupted the US banks in the 2007-2008 crash. 

Restoring Proper Financial Regulation 

Glass-Steagall forces separation of commercial from investment banks, it ends Too Big To Fail, bars government bailouts, and will stop the onset of hyperinflation.

On Friday Sen. Tom Harkin (D-Ia.) introduced Senate Bill 985 (#SB985) to reinstate Glass Steagall. While the full text of the Harkin bill has not yet been posted by the Library of Congress, the fact that there is now a Senate bill to reinstate full separation of commercial banking from all other brokerage and speculative activities is a dramatic development. The fight for Glass Steagall has now moved to a new level.

This comes at a very precise and fortunate time.  Earlier this year, Rep. Marcy Kaptur, D-Ohio, introduced HR 129 to restore Glass-Steagall, saying, “The response of Congress to the 2008 financial crisis has been completely inadequate.”  Currently #HR129 – The Return to Prudent Banking Act– has 60 bipartisan co-sponsors in the House.  Four states have passed resolutions calling for reimplementation of Glass-Steagall, and a dozen other legislatures, including Virginia’s, are considering similar measures.


Specifically, the draft legislation has four components:

1. Commercial Banking institutions have one year to divest themselves of all non-commercial banking units, with no cross management or ownership between commercial and non-commercial units.

2. Commercial Banks are barred from using more than 2% of its capital for the creation, sale, or distribution of securities (certain bank-qualified securities are exempted)

3. Prevents Commercial Banks from loaning their commercial deposits into such vehicals as would support the creation and circulation of securities.

4. No securities of low or potentially low value can be placed by a bank into its insured commercial bank units. * Adds provision stating Glass-Steagall is the preeminant regulator of the banks, limiting banks from putting its depositors and shareholders at risk.

What is important about this legislation over all others is that there would be absolutely no room for loopholes.  There can be no accidental oversight or negligence.  Investment banking would be completely separated from commercial banking.   

This is NOT to be confused with the red herring that Obama supported earlier in his first term, known as the "Volcker rule" named after former Federal Reserve chairman Paul Volcker .  That was a more complicated piece of legislation meant to stall real effective rules.  There is a reason for that.  Obama has received millions of dollars from investment banks, just like Romney, Bush, and all other presidential candidates.  The banks always hedge their bets and play both sides against the other.  DO NOT BE DECEIVED THIS TIME!

Additional Commentary

If you need more details on the Glass-Steagall Act of 1933 and why it is important to restore, watch this video.  Max Keiser is an excellent financial news reporter that does not hold back any punches for any banker fraud and conspiracy.

And in case you need still more reason to support restoring Glass-Steagall, hear what Elizabeth Warren has to say about it.  Remember she was warning us all of the impending doom from 2005-2008 as the housing bubble and financial crisis was bubbling.

If you want to know more about who was responsible for repealing Glass-Steagall, watch this video and look to Alan Greenspan.