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Press Release of Senator Cantwell
Cantwell, McCain Bill Returns Stability and Security to Commercial Banking
Stops Depositors' Money From Being Used In Wall Street Speculation; Returns Money to Main Street Investment
Wednesday, December 16,2009
WASHINGTON, DC – Today, U.S. Senators Maria Cantwell (D-WA) and John McCain (R-AZ) introduced a bipartisan bill that separates commercial banks and investment banks. The bill restores safeguards that protect Americans’ deposit money from being used in Wall Street’s risky speculation.
“America can’t afford another financial crisis,” said Cantwell. “With big banks using depositor money to gamble on Wall Street, it’s only a matter of time. Banks need to be lending to small businesses and homeowners, not fueling risky Wall Street investment schemes. We must return stability, security and confidence to commercial banking for the American public. The first step is this bill.”
“I am pleased to be working with Senator Cantwell on this important issue,” said McCain. “My reasons for joining this effort are simple – I want to ensure that we never stick the American taxpayer with another $700 billion – or even larger – tab to bailout the financial industry. If big Wall Street institutions want to take part in risky transactions – fine. But we should not allow them to do so with federally insured deposits. It is time to put a stop to the taxpayer financed excesses of Wall Street. No single financial institution should be so big that its failure would bring ruin to our economy and destroy millions of American jobs. This country would be better served if we limit the activities of these financial institutions.”
Cantwell-McCain would prohibit commercial banks from affiliating in any manner with investment banks and vice versa; prevent officers, directors, and employees of a commercial bank from serving as an officer, director, or employee of an investment bank and vice versa; prohibit commercial banks from engaging in all insurance activities; and establish one year from date of enactment as the deadline for financial houses to transition and separate their commercial and investment banking operations.
Beginning in 1933, Glass-Stegall established a wall between commercial and investment banking to protect depositor money from being put at risk by Wall Street speculation. For nearly 60 years, this firewall maintained the integrity of the banking system; prevented self-dealing and other financial abuses; and limited stock market speculation. But since its repeal, banks have blended banking and brokerage, using loopholes in the Act and other statutes to market financial products like stocks, mutual funds and underwriting stocks to their consumers at the same time. When these megabanks default under the current system, taxpayers pay for the losses twice over.
The biggest banks keep getting bigger in the bailouts and the acquisitions. While there are 7,000 commercial banks in the United States, just five of them hold over 50 percent of our nation’s bank-owned assets. Those same five entities hold over 95percent of the risk in the derivates markets – nearly $600 trillion worth.
Under Cantwell-McCain, major financial firms currently operating both commercial banks and investment houses will have to make a decision on whether to focus on commercial banking or investment banking. In most of these institutions, the investment banks and the commercial banks will both be very valuable independently and profitable for their stockholders. By separating the commercial banks from the investment banks, Cantwell-McCain ends speculation with depositor money and returns investments to Main Street.
Click here to watch the video of Senators Cantwell and McCain discussing their legislation at a press conference on December 16, 2009.