Hillary Clinton won’t propose
reinstating a bank break-up law known as the Glass-Steagall Act – at least according
to Alan Blinder, an economist who has been advising Clinton’s campaign. “You’re
not going to see Glass-Steagall,” Blinder said after her economic speech
Monday in which she failed to mention it. Blinder said he had spoken to
Clinton directly about Glass-Steagall.
This is a big mistake.
It’s a mistake
politically because people who believe Hillary Clinton is still too close to
Wall Street will not be reassured by her position on Glass-Steagall. Many will recall
that her husband led the way to repealing Glass Steagall in 1999 at the request
of the big Wall Street banks.
It’s a big mistake economically
because the repeal of Glass-Steagall led directly to the 2008 Wall Street
crash, and without it we’re in danger of another one.
Some background: During the Roaring
Twenties, so much money could be made by speculating on shares of stock that several
big Wall Street banks began selling stock along side their traditional banking
services – taking in deposits and making loans.
Some banks went further, lending to
pools of speculators that used the money to pump up share prices. The banks sold the
shares to their customers, only to have the share prices collapse when the
speculators dumped them.
For the banks, it was an egregious but hugely profitable conflict of
After the entire stock market crashed
in 1929, ushering in the Great Depression, Washington needed to restore the
public’s faith in the banking system. One step was for Congress to enact
legislation insuring commercial deposits against bank losses.
Another was to
prevent the kinds of conflicts of interest that resulted in such losses, and
which had fueled the boom and subsequent bust. Under the Glass-Steagall Act of 1933,
banks couldn’t both gamble in the market
Originally appeared at: http://robertreich.org/post/124114229225
Hillary Clinton’s Glass-Steagall is a story from: BitcoinWarrior.net