I commented previously on the War Between the Banks and how it came to be. Now there are efforts by some congressmen to restore the provisions of the Glass-Steagall Act that once prevented banks from making high risk financial moves with your money. Ten years ago, Newt Gingrich, as Speaker of the House, and President Clinton passed and approved the Financial Services Modernization Act of 1999 ( aka Gramm-Leach-Bliley Act) that removed the protections. It took only ten years after that to wreak havoc with the US banking system.
My advice is still the same: Keep your money in small banks right now. We have our money split between three banks at the moment. Not that we have that much money, but if one of them fails, we have money to live on until the FDIC pays us off.
Sen. Maria Cantwell and Sen. John McCain are sponsoring legislation to restore some protections to the banking industry. Sen. Feingold supports their efforts and will co-sponsor their legislation.
From Sen. Feingold’s Newsletter:
Washington, D.C. – U.S. Senator Russ Feingold is cosponsoring bipartisan legislation to safeguard Americans’ money deposits from risky Wall Street speculation. Feingold is supporting legislation introduced by Senators Maria Cantwell (D-WA) and John McCain (R-AZ) to restore decades-old protective firewalls between Main Street banks, Wall Street securities firms, and insurance companies. In 1999, Congress voted to effectively eliminate those protections and Feingold was one of eight senators to oppose the deregulation effort. The tearing down of the firewalls contributed to the growth of mammoth “too big to fail” financial entities that taxpayers were asked to bail out last year. Feingold opposed the Wall Street bailout, as well.
“The collapse of these ‘too big to fail’ entities was a major contributor to the global financial crisis from which we are still recovering. But that collapse was set in motion decades earlier when regulators began to erode the protections established by Glass-Steagall, culminating in the repeal of key Depression-era safeguards in 1999,” Feingold said. “Former Federal Reserve Board Chairman Paul Volcker is absolutely right that Main Street banks, on which so many businesses depend, and which hold deposits backed by the FDIC, and ultimately by taxpayers, should be kept completely separate from Wall Street securities firms. That financial safeguard served our economy well for nearly 70 years, and we should bring it back.”
The Cantwell-McCain legislation, which Feingold is cosponsoring, would:
- Prohibit commercial banks from affiliating in any manner with investment banks and vice versa;
- Prevent officers, directors, and employees of a commercial bank from serving as an officer, director, or employee of an investment bank and vice versa;
- Prohibit commercial banks from engaging in all insurance activities;
- Establish one year from date of enactment as the deadline for financial houses to transition and separate their commercial and investment banking operations.
On November 4th, 1999, Feingold was one of eight U.S. Senators to oppose the final version of the Gramm-Leach-Bliley Act, which effectively repealed the Glass-Steagall Act. In his statement opposing the bill, Feingold said it would declare “the ultimate bank holiday – giving banks, insurance companies and securities firms a permanent vacation from” Depression-era banking law reforms. Feingold also said it would lead to “merger-mania.” Feingold also noted the massive lobbying campaign that accompanied the Gramm-Leach-Bliley Act, which included $187.2 million in political contributions in support of the deregulation. In what he billed as “the calling of the bankroll,” Feingold listed the financial institutions that lobbied on behalf of the bill and the massive sums they gave during the 1998 election cycle.
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