Tuesday, July 19, 2016

Wolf Richter — Nightmare on Wall Street: Republicans & Democrats Agree on Reinstating Glass-Steagall Act

An amazing thing happened at the Republican Convention when some unexpected language showed up in the official 66-page Republican Platform 2016, a document that a delegate from Texas enthusiastically called, “the most conservative platform in modern history.”
And therein is this sentence:
We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.
It’s followed by this bit of wisdom: “Sensible regulations can be compatible with a vibrant economy….” By extension, reinstating the Glass-Steagall Act would be that “sensible regulation.”…
Turns out, on June 25, similar language showed up in the draft of the Democratic Platform, under the evil heading “Wall Street Reform,” and it reappeared in the July 1 version of the draft in slightly watered-down form (emphasis added):
Democrats will not hesitate to use and expand existing authorities as well as empower regulators to downsize or break apart financial institutions when necessary to protect the public and safeguard financial stability, including new authorities to go after risky shadow-banking activities. Banks should not be able to gamble with taxpayers’ deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernized version of Glass-Steagall and breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.
This was Bernie’s doing. He pushed Hillary Clinton into what must be for her – who’s made a fortune off Wall Street – a very unsavory direction. Now it’s in the Democratic platform, to be adopted at the convention in Philadelphia next week.…
Unfortunately, platforms are political hot-air and it all depends on who wins the election and what parts of the platform they choose to support and which to ignore. Getting things done in Washington takes "political capital," and presidents use their political capital to accomplish their priorities.

So don't get your hopes up to high over this.


Matt Franko said...

All we need is Glass-Steagall and everything is going to be great!

Andrew Anderson should be very pleased at least....

Andrew Anderson said...

Andrew Anderson should be very pleased at least.... Franko

Actually, let 100% private banks with 100% voluntary depositors do as they please subject to the usual laws against fraud and insolvency. Glass-Steagall was/is just a red herring away from true reform.