U.S. Sen. Maria Cantwell and U.S. Rep. Jay Inslee both have their names on bills that would restore the 1933 Glass-Steagall act. The bill would require commercial and investment banks to operate separately.
Washington Democrat Cantwell is joined by U.S. Sen. John McCain, R-Ariz. in sponsoring the Senate Bill.
Inslee, a Bainbridge Island Democrat, is a co-sponsor on a bill forwarded by New York Democrat Maurice Hinchey. From Inslee’s press release:
“If we allow banks to become too big to fail, than we will have done little to succeed,” said Rep. Inslee. “When I voted against the repeal of Glass-Steagall in 1999, I did so because I feared that consolidation in the financial industry could wreck the economy. That fear was substantially realized and today we should adopt one principle – never again.”
In 1999 Glass-Steagall was repealed by the Gramm-Leach-Bliley Act. A Bloomberg story on the restoration has one expert calling it “crazy,” but another saying the 1999 move has been acknowledged as a mistake. From the story:
“Trying to split them up is crazy,” John Douglas, a former general counsel at the Federal Deposit Insurance Corp. who leads the bank regulatory practice at Davis Polk & Wardwell LLP in New York, said in a telephone interview. “The integration of the securities and banking function came about because of the need of large corporate customers to have integrated banking and securities services.”
and
“We cruise along for 80 years without a major calamity infecting the entire financial system and then less than eight years after the repeal of Glass-Steagall we have a financial meltdown in this country,” Camden Fine, president of the Washington-based trade group for about 5,000 smaller U.S. banks, said in a telephone interview. “That’s no accident.”
I did a search for the 2009 bill and couldn’t find it yet. It
might be too early yet. For the 1999 bill I did confirm that Inslee
voted against it, but he was one of only 57, including four
Republicans, who did. U.S. Rep. Norm Dicks, D-Belfair, was among
the 362 House members who voted for it. In the Senate the vote was pretty much
party line, 54-44. Washington Republican Slade Gorton voted for it
while Democrat Patty Murray voted “nay.” Only one Democrat, South
Carolina’s Ernest Hollings, voted for it. No Republicans voted
against it. In the Senate both Republican Slade Gorton
and Democrat Patty Murray voted for it. Thank you Bob for the
correction. Indeed I was looking at the wrong vote.
Inslee’s press release follows the jump.
Rep. Inslee Helps Lead Effort to Reinstate Glass-Steagall
Act
Legislation would split megabanks and reinstitute wall separating
investment and commercial banking
(Washington, DC) – This afternoon Congressman Jay Inslee joined with sponsor Maurice Hinchey (D-NY) to introduce legislation to reinstate portions of the Banking Act of 1933, known to most as the Glass-Steagall Act. The legislation would once again create a wall between investment and commercial banking thus protecting taxpayers. The legislation is also being co-sponsored by Reps. John Conyers (D-MI), Peter DeFazio (D-OR), Marcy Kaptur (D-OH), Jim McDermott (D-WA), and John Tierney (D-MA). The Glass-Steagall Act was overwritten in 1999 by the Gramm-Leach-Bliley Act.
“If we allow banks to become too big to fail, than we will have done little to succeed,” said Rep. Inslee. “When I voted against the repeal of Glass-Steagall in 1999, I did so because I feared that consolidation in the financial industry could wreck the economy. That fear was substantially realized and today we should adopt one principle – never again.”
Congressman Inslee first offered legislation to reintroduce Glass-Steagall in the House Energy and Commerce Committee on October 29th, which was subsequently adopted and offered as an amendment to the financial reform bill by Congressman Hinchey.
The legislation would take effect one year after passage, and would specifically prohibit banks from being affiliated with any corporation or similar organization that deals with stocks, bonds, or other securities. This year, just four financial institutions hold half the mortgages in the United States, issue nearly two-thirds of credit cards, and control about forty percent of all bank deposits. In addition, the face value of over-the-counter derivatives at commercial banks has grown to $290 trillion, ninety-five percent of which are held at five financial institutions.
In 1987, a Congressional Research Service (CRS) prepared a
report which warned of the huge risk to taxpayers if Glass-Staegall
was repealed noting, “Securities activities can be risky, leading
to enormous losses. Such losses could threaten the integrity of
deposits. In turn, the Government insures deposits and could be
required to pay large sums if depository institutions were to
collapse as the result of securities losses.”
# # #
You are looking at the wrong votes in Congress. Look at the votes on final passage of the bill after the conference committee worked out the differences between the House version and the Senate version. Final passage was in November. The vote in the Senate was 90 in favor and 8 against–both Gorton and Murray voted “yea.” In the House, only Inslee and McDermott voted “no.” It passed the House 362 to 57.