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JonLeibowitz

(6,282 posts)
Tue May 31, 2016, 10:40 PM May 2016

NY Congressman on Glass-Steagall in NYT Op-Ed: "Don't Let Banks Become Casinos"

WASHINGTON— Citing the pressures of rigorous worldwide competition in financial services, large American banks are pleading for the repeal of the Glass-Steagall Act, a law that keeps banks out of the more volatile and risky world of securities transactions. Their entreaties should be resisted. The reasons the act was passed are still valid, and it has not interfered with our ability to compete internationally.

The Glass-Steagall Act of 1933 evolved from the bitter experience of the Depression, when American banking was in shambles. Left free to speculate in the 1920's, banks naturally looked where profits seemed highest, and were inevitably drawn into risky propositions. When a few banks failed, depositors nationwide panicked. Runs on banks pushed this country over the brink of financial disaster.

Stability was restored only years later, after the Federal Government insured depositors' money and imposed tough limits on the kind of risks a bank can undertake.

Today's bankers promise they will be more careful. But to accept their assurances runs counter to the simple principles of fairness and common sense. Banks want to keep the Federal insurance that attracts depositors and then use that capital to compete against traditional, unsubsidized securities firms.

No one could complain if banks renounced their Federal insurance and then competed evenly against securities firms. But the banks simply should not be allowed to gamble with taxpayer insured dollars.

The banks' proposals also defy common sense. Given the chance to speculate, some institutions are going to gamble poorly. This in turn will undermine confidence in the whole banking system. The recent experience of the thrift industry reinforces this lesson. Congress stepped in with $10.8 billion to bail out the thrift industry. A bailout of the much larger commercial banking sector, if it got into a similar problem, would make the recapitalization for thrifts seem insignificant.


Continued: http://www.nytimes.com/1987/08/26/opinion/don-t-let-banks-become-casinos.html

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This congressman from NY is quite insightful, and should be listened to. I hope Clinton pays some attention to him. I only hope that in the years ahead that this congressman is not affected by large campaign contributions from big banks and continues to be a forceful advocate for Glass-Steagall and financial reform. If he does this he is a patriot; we may even have some hope that the campaign finance system is not rigged and corrupting!
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