In a valiant effort to undo one of the regulatory fuckups that led to the 2007-08 financial crisis, a bipartisan group of senators has introduced a bill that would reinstate some of the provisions of the New Deal-era Glass-Steagall Act, requiring banks to separate their retail banking functions from their riskier investment activities, essentially forcing most big banks to split into smaller entities. The bill is sponsored by Wonkette Permanent Nerdlust Object Elizabeth Warren, Washington Sen. Maria Cantwell, Sen. Angus King of Maine, and, in one of his mystifying periodic lurches toward responsible governing, by Sen. John McCain (R-Walnuts). Does the “21st Century Glass-Steagall Act” have a chance of becoming law? Hahaha, we actually asked that question out loud, didn’t we?
Glass-Steagall, as all good nerds know, separated investment banking from retail banking; its irrationally exuberant repeal in 1999 allowed megabanks to take your savings with one hand and use them to buy collateralized debt obligations and credit default swaps and a bunch of other toxic subprime mortgage garbage with the other — all while depositors’ funds remained insured by the FDIC. The repeal also led to a lucrative wave of bank mergers, giving us the “too big to fail” financial institutions that had to be bailed out, since allowing them to go under would have turned a recession into a depression (which is what your tea partiers seriously wish had happened, because free market). Breaking up the megabanks wouldn’t eliminate risky speculation, but it might at least curb the orgy of gambling that led to the 2008 crisis, and would reduce the impact of any one bank failing.
In support of the proposal, John McCain said in a statement,
“Since core provisions of the Glass-Steagall Act were repealed in 1999, shattering the wall dividing commercial banks and investment banks, a culture of dangerous greed and excessive risk-taking has taken root in the banking world … Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits.”
We like that funny joke about how Wall Street’s culture of greed took root after Glass-Steagall was repealed. Yes, and the inmates were running the asylum very responsibly right up until they were handed the keys to the pharmacy.
As Mother Jones notes, a lot of people hoped that Glass-Steagall would be resurrected after the 2008 financial meltdown, but instead, we got Dodd-Frank in 2010. Bank lobbyists, with help from right wing media, have largely defanged the modest restrictions on risky financial behavior in Dodd-Frank, which still isn’t even fully implemented, so we aren’t especially optimistic about the chances of an attempt to actually bust up the megabanks.
But we have to say we like the idea of people rallying behind the slogan Warren has proposed to support this bill: “Banking should be boring.” We definitely want that on a t-shirt.
Wonkette Programming note: Kid Zoom is visiting relatives in in that one state with the lakes and the crazy-eyed Congresslady. “Teen Korner For Teenz” will return in two weeks.