Public Citizen, a national nonprofit consumer advocacy group in Washington, D.C., has released a brief report in support of reinstating a modified version of a federal law that used to separate banking and Wall Street investment activities.
The release of the report, "Safety glass," was timed to coincide with the 80th anniversary of the enactment of the Glass-Steagall Banking Act of 1933.
This law, known simply as "Glass-Steagall" after Sen. Carter Glass, D-Va., and Rep. Henry Steagall, D-Ala., created the Federal Deposit Insurance Corp. and directed banks that utilized the FDIC insurance program to engage mainly in making loans to businesses and consumers, according to Public Citizen.
The law was "whittled away" over the next century and finally "finished off," to quote Public Citizen, when former President Bill Clinton signed the Gramm-Leach-Bliley Act of 1999, opening the way for banks to expand into investment activities that previously had been prohibited.
"It may be inappropriate to simply roll back every legal and regulatory change as finance today differs somewhat from the landscape of 1933. But one thing endures: We can rely on Wall Street to be a reliable source of new examples for why we need rules to keep banks from acting recklessly and irresponsibly," the report stated.
The report includes four pages of background information about Glass-Steagall, a three-page appendix of quotes from politicians, regulators and financial industry executives, and lists of Congressional representatives and states that support efforts to restore the separation between commercial banking and investment businesses, according to Public Citizen.
The report was written by Bartlett Naylor, a financial policy advocate at Public Citizen.
"The problems of mega-banks, such as JP Morgan, today are the same that rudely visited America before Glass-Steagall was put in place -- namely, allowing banks to gamble with investors' hard-earned money and throwing the economy into predictable crises that require massive taxpayer bailouts," Naylor said in a statement.
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