Senators John McCain and Maria Cantwell have introduced legislation which would reinstate Glass-Steagall. The Glass-Steagall act was a law which was introduced after the Great Depression. It separated banks into different types and made it illegal for banks which held deposits to be involved in investments and vice versa. That meant that the bank that held your retirement savings and mortgage couldn’t be using the money to mess around in things like credit default swaps.
Bringing Glass-Steagall back would be a good thing. Paul Volcker has been lobbying for this for a while now. Elizabeth Warren has advocated something similar. Getting rid of Glass-Steagall was clearly a mistake and a root cause of the mess we found ourselves in last year.
Glass-Steagall was repealed in 1999 by the Gramm-Leach-Bilely act. The irony is that the first name in the name of that act is none other than Phil Gramm who was John McCain’s chief economic advisor during his campaign for President last year. I guess John learned something this year.
I hope that they can get this bill, or something like it, enacted. I wonder how messy the process of splitting up those giant banks will be though.