Elizabeth Warren Introducing A Bill That Would Be Wall Street's Worst Nightmare

By:  Business Insider - Linette Lopez
Source: Business Insider

Elizabeth Warren is making good on her promise to scare Wall Street. Today,  she'll introduce a bill to reenact Glass-Steagall.

Glass-Steagall is the 1933 law that separated commercial and investment  banking. Back in 1999 it was repealed by the Gramm-Leach-Bliley Act  at the urging of Wall Street heavyweights like then-Citi CEO Sandy  Weill.

Then the financial crisis happened. Many banks failed and others got swallowed up into larger  banks.

After all that, Sandy Weill said he was wrong on national television.

Elizabeth Warren was elected to the Senate based in part on her crusade  against Wall Street excess. For many, this is one massive way to do that. Sen.  John McCain (R-Ariz), Washington Democrat Maria Cantwell and Maine Independent  Angus King are co-sponsoring the bill.

You can read it in full here, but the introduction follows:

To reduce risks to the financial system by  limiting banks’ ability to engage in certain risky activities and  limiting conflicts of interest, to reinstate certain  Glass-Steagall Act protections that were repealed by the Gramm-Leach-Bliley  Act, and for other purposes.

This is a move to reduce the size of  America's behemoth banks. We've heard the slogans not just from Warren, but also  Senators David Vitter (R-LA) and Sherrod Brown (D-OH)— "too big to fail," "too  big to manage." 

Wall Street's army of lobbyists are  unlikely to let this stand without an epic fight. Let them march; Warren loves  being a conversation starter, and she'll repeat this one over and over  again.

Read the full statement from Warren's office below:

Washington, DC - Senators Elizabeth Warren (D-MA), John McCain (R-AZ), Maria Cantwell (D-WA), and  Angus King (I-ME) today will 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.

The legislation introduced today would  separate traditional banks that have savings and checking accounts and are  insured by the Federal Deposit Insurance Corporation from riskier financial  institutions that offer services such as investment banking, insurance, swaps  dealing, and hedge fund and private equity activities. This bill would clarify  regulatory interpretations of banking law provisions that undermined the  protections under the original Glass-Steagall and would make "Too Big to Fail"  institutions smaller and safer, minimizing the likelihood of a government  bailout.

"Since core provisions of the  Glass-Steagall Act were repealed in 1999, shattering the wall dividing  commercial banks and investment banks, a culture of dangerous greed and  excessive risk-taking has taken root in the banking world," said Senator John  McCain. "Big Wall Street institutions should be free to engage in transactions  with significant risk, but not with federally insured deposits. If enacted, the  21st Century Glass-Steagall Act would not end Too-Big-to-Fail.  But, it  would rebuild the wall between commercial and investment banking that was in  place for over 60 years, restore confidence in the system, and reduce risk for  the American taxpayer."

"Despite the progress we've made since  2008, the biggest banks continue to threaten the economy," said Senator  Elizabeth Warren.  "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.  The  21st Century Glass-Steagall Act will reestablish a wall between commercial and  investment banking, make our financial system more stable and secure, and  protect American families."

"Too many Main Streets across America have  paid the price for risky gambling on Wall Street," Senator Maria Cantwell said.  "This bill would restore clear bright lines that separate risky activities from  the traditional banking system. It's time to restore faith in our financial  institutions by rebuilding the firewall that protected our economy for decades  in the wake of the Great Depression. Restoring Glass-Steagall would focus our  financial system where it belongs: getting capital into the hands of job  creators and businesses on Main Streets across America."

"As Maine families continue to feel the  sting of the 2008 economic downturn, America's largest financial institutions  continue to engage in risky banking and investment activities that threaten the  health of our financial sector and our economy as a whole. While recent efforts  at financial sector regulatory reform attempt to address the ‘too big to fail'  phenomenon, Congress must take additional steps to see that American taxpayers  aren't again faced with having to bail out big Wall Street institutions while  Main Street suffers," Senator Angus King said. "While the 21st Century  Glass-Steagall Act is not the silver bullet to end ‘too big to fail,' the  legislation's re-establishment of clear separations between retail and  investment banking, as well as its restrictions on banking activities, will  limit government guarantees to insured depository institutions and provide  strong protections against the spillover effects should a financial institution  fail."

The original Glass-Steagall legislation was  introduced in response to the financial crash of 1929 and separated 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.  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.

Read more:  http://www.businessinsider.com/warren-bill-to-bring-back-glass-steagall-2013-7#ixzz2ajS6Thgp