Wednesday, December 16, 2009

Congress considers reinstating Glass Steagall Act

WASHINGTON (Reuters) - Financial giants such as Goldman Sachs Group could be broken up under two bills introduced in the U.S. Congress on Wednesday, one with the backing of former Republican presidential nominee John McCain.

Both would reinstate the 1930s-era Glass-Steagall laws that barred large banks from affiliating with securities firms and being active in the insurance business. Those limits were largely repealed in 1999, a high-water mark for deregulation.

"It is time to put a stop to the taxpayer financed excesses of Wall Street ... This country would be better served if we limit the activities of these financial institutions," McCain said in a statement with Democratic Senator Maria Cantwell.

Passage of the Cantwell-McCain bill would force firms at the center of last year's financial crisis -- such as Goldman, Morgan Stanley, Citigroup, JPMorgan Chase and Wells Fargo -- to spin off investment and insurance operations, said Demos, a progressive think tank in New York.

A similar measure was offered on Wednesday by seven Democrats in the House of Representatives, including Judiciary Committee Chairman John Conyers and Maurice Hinchey.

The bills come as Congress debates a sweeping overhaul of financial regulation more than a year since a severe banking and capital markets crisis that rocked economies worldwide.

Read the rest here.

This is a rare case where I think government regulation is warranted. The repeal of Glass Steagall under Bill Clinton's administration allowed banks to grow into massive conglomerates with their fingers in every sector of the economy that have since been termed "too big to fail." That is something that must not be allowed to continue. We can't afford to have the entire country's economy put at risk again by Wall Street bankers playing fast and loose with other people's money.

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