Elizabeth Warren Hits Big Banks Where It Hurts, New Bill Would Restore Glass-Steagall
The 21st Century Glass Steagall Act would break up big banks by separating traditional retail banking (checking, savings) from riskier banking activities including swaps dealing and private equity and hedge fund activity.
John McCain (R-AZ) and Maria Cantwell (D-WA) joined Warren in introducing the bill today which they say reduces the risk of another financial crisis and decreases risk to the American taxpayer.
“The four biggest banks are now 30% larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk,” she added in a statement today.
Warren is referring to JPMorgan Chase JPM +1.44%, Bank of America BAC +2.33%, Citigroup C +1.71% and Wells Fargo WFC +1.7%. It should be noted that some of the nation’s biggest banks are now bigger because of last minute emergency mergers and acquisitions that took place during the crisis in 2008–some notable deals were encouraged by the government itself.
Senator Warren is doing what many elected her to do in November; take on Wall Street in a post-crisis era. The former Harvard Law School professor and former White House official who served as a special advisor to the Secretary of the Treasury helped create the Consumer Financial Protection Bureau.
That’s where she gained many of her adversaries as well as supporters.
It’s no surprise Warren is introducing this bill. She’s already called for a more modern version of Glass-Stegall which separated investment banks from retail banks. The law was repealed in 1999 after Citicorp and Travelers Group announced they were merging.
If passed Warren’s updated version of Glass-Steagall would give banks five years to start splitting up.
Of course, getting enough support to get the bill passed won’t be easy. It’s not the first time a lawmaker has tried to split banks up.
Wall Street argues it needs its banks to remain big in order to remain competitive.
Bank of America CEO Brian Moynihan has spoken against the measure saying universal banking model is the “most important” model there is because it gives consumers access to global information, capital markets, investment advice and basic banking all in one place. “We can’t be competitive if we can’t provide all those services to our consumers,” he said.
JPM’s CEO Jamie Dimon has argued the same. ““There are huge benefits to size. We bank Caterpillar in like 40 countries. We can do a $20 billion bridge loan overnight for a company that’s about to do a major acquisition. Size lets us build a $500 million data center that speeds up transactions and invest billions of dollars in products like ATMs and apps that allow your iPhone to deposit checks. We move $2 trillion a day, and you can see it by account, by company. These aren’t, like, little things. And they accrue to the customer. That’s what capitalism is,” he told New York Magazine last year.
It’s no surprise banks don’t want to be broken up but that’s not going to stop Elizabeth Warren from trying.
Next Article Previous Article