By now it is obvious to everyone that repealing Glass Steagall was a huge mistake, because it allowed banks to get into trouble. So why not just reinstate Glass-Steagall? I worked well for decades and its absence has caused innumerable problems, so why not just return to it? The answer is that big banks do not like Glass-Steagall, and the banks control the politicians, so they prevent real reform. Nothing gets fixed, problems continue, and we all suffer. The banks, however, do very well at our expense.
I want to go back to plain old boring banking, like in the old days. We would be a lot better off if banks would stop playing like in a Casino. Far far too much of our economy is oriented around trying to play clever financial games, to skim off of millions, while providing no real benefit to the economy (usually the reverse).
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The recent news that JP Morgan Chase lost at least $2 billion in a matter of weeks on hugely risky bets shows once again that we need to rein in Wall Street and stop the banks from gambling with our money.
For over half a century, the Depression-era law known as the Glass-Steagall Act kept commercial banks (where we have our checking accounts, saving accounts and the like) separate from high-risk investment banks.
The government agreed to insure the deposits we make in commercial banks through the FDIC, but banks weren’t allowed to turn around and use these deposits as stakes in the Wall Street casino.
That all changed in 1999 with the repeal of Glass-Steagall, which paved the way for the financial crisis and the massive Wall Street bailouts.
If private investors want to use their own money to make risky bets on Wall Street, that should be up to them. Ultimately, they’re risking their own money.
But when these giant banks take on more risk than they should, they do so knowing that they can keep any profits they make if things go well, but that ultimately U.S. taxpayers are on the hook if things go terribly wrong. That creates a perverse incentive for them to be massively irresponsible.
When Congress passes Wall Street reform in 2010, it was supposed to end precisely this type of “heads they win, tails we lose” scenario. But the Volcker Rule that was supposed to address this, still hasn’t been finalized and looks like it will be riddled with loopholes.
Tell Congress that we need a new Glass-Steagall Act that reinstates the firewall between the banks we use to keep our money safe and the Wall Street banks that make risky investments. Click below to automatically sign the petition:
Thank you for speaking out.
Matt Lockshin, Campaign Manager
CREDO Action from Working Assets