By U.S. Sen. Angus King
(I-Maine)
It has been five years since Wall Street’s riskiest financial transactions went awry and left Main Street to pick up the pieces. Maine, which saw unemployment peak at the height of the crisis, is still struggling to recover the thousands of jobs that were lost due to irresponsible practices at the biggest financial institutions. In the aftermath of the crisis,
Congress has made strong efforts to rein in Wall Street, but a growing chorus of voices are questioning whether these efforts, like the 2010 Dodd-Frank Act, will end the troubling phenomenon known as “too big to fail.”
Now, I have always been skeptical of Dodd-Frank because of the regulatory burdens it places on smaller banks which had nothing to do with the crisis five years ago. These banks have been forced to comply with thousands upon thousands of pages of regulations that are unnecessary, expensive, negatively affect credit, and just don’t make sense.
What I do support, and have worked with my colleagues to develop, is a structural change to the banking industry rather than a regulatory one. I am proud to have joined Sens. Elizabeth Warren, John McCain, and Maria Cantwell to introduce the 21st Century Glass-Steagall Act, a modern version of the Banking Act of 1933 (Glass-Steagall) that reduces risk for the American taxpayer in the financial system and decreases the likelihood of future financial crises.
Our legislation would create a functional division between traditional banks that have savings and checking accounts, and are insured by the Federal Deposit Insurance Corporation, and riskier financial institutions that offer services such as investment banking, insurance, swaps dealing, and hedge fund and private equity activities. The original Glass-Steagall act, introduced in response to the financial crash of 1929, at its heart did the same thing – separate depository banks from investment banks. The idea was to divide the risky activities of investment banks from the core depository functions that consumers rely upon every day. However, starting in the 1980s, regulators at the Federal Reserve and the Office of the Comptroller of the Currency reinterpreted longstanding legal terms in ways that slowly broke down the wall between investment and depository banking and weakened Glass-Steagall. In 1999, after 12 attempts at repeal, Congress passed the Gramm-Leach-Bliley Act to repeal the core provisions of Glass-Steagall. To ensure that our bill does not succumb to the same fate, we have clarified the regulatory interpretations of those banking law provisions that undermined the original Glass-Steagall.
This legislation illustrates what can be accomplished when coalitions form that include lawmakers from both sides of the aisle. In order to address our nation’s problems, Congress must be willing to look beyond party ideology and reach agreements that reflect the best interests of the American people. The 21st Century Glass-Steagall Act is just that. Our bill represents bipartisan, common-sense solution that, if passed, would help prevent another financial meltdown, like we saw five years ago, without placing unnecessary burdens on small banks. I think I speak for all of us when I say, if someone wants to go to Las Vegas, that’s fine – but I don’t want to pay for it. We must protect the American taxpayer from having to shoulder another recession brought on by Wall Street’s swashbuckling, risk-taking activities.
