Quotes About Glass-Steagall

Tea Party people know that I stood against the Wall Street scam from Day One, that I voted against TARP, that I voted against repealing Glass-Steagall Act that kept these guys under some control.

But after all the horse trading between Democrats and Republicans—and reformers, bankers, and lobbyists—I fear that its complex, obtuse regulations (some 170 separate rules are still being developed) involved in limiting proprietary trading by banks makes me wish we'd taken the simple step of restoring the separation of deposit taking banks from investment banks. The Glass-Steagall Act of 1933 worked well until it was gradually eroded and finally repealed in 1999.

The administration will look at Glass-Steagall and what I referred to as the 21st-century Glass-Steagall as part of regulatory reform.

Bringing back something akin to Glass-Steagall would clearly help limit risk in the system. And that's a very good and worthy goal. Letting banks sell securities and insurance products and services allowed them to grow too big too fast and fueled a culture that put profit and pay over prudence.

Since JPMorgan Chase announced its surprise $2 billion-and-growing trading loss, there have been renewed calls from economists, pundits, and politicians to reinstate the Glass-Steagall Act, a Depression-era law that prevented commercial banks from participating in investment banking activities.

Glass-Steagall was an act of the US Congress, but it worked more like an act of God. It cleaved mankind in two. With it, in 1934, American lawmakers had stripped investment banking out from commercial banking. Investment bankers now underwrote securities, such as stocks and bonds. Commercial bankers, like Citibank, took deposits and made loans. The act, in effect, created the investment banking profession, the single most important event in the history of the world, or so I was led to believe.

Should we think about separating the investment banks from the commercial banks, a new Glass-Steagall? I would be really excited to see that. I think it would be great for the economy.

Separating out banks and investment banks right now under Glass-Steagall would have very big implications to the liquidity and the capital markets and banks being able to perform necessary lending.