Senate Proposes 21st Century Glass-Steagall to Break Up Large Banks

3,949
1,194
Joined Nov 16, 2001
I'm glad to see there's another attempt to bring this back. We danced around it with so many other bills that will do nothing and yet this was what many agree helped propel much of the financial crisis. It's just unfortunate that this bill probably won't see the light of day.

http://finance.yahoo.com/news/senators-introduce-bill-break-megabanks-165434601.html

WASHINGTON (Reuters) - A small bipartisan group of senators on Thursday introduced legislation that would break up Wall Street's megabanks by separating traditional banking activity from riskier financial services.

The bill, called the 21st Century Glass-Steagall Act, has an uncertain future, but it shows some lawmakers' frustration that banks have only continued to grow since the 2007-2009 financial crisis.

"The four biggest banks are now 30 percent larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk," said Democratic Senator Elizabeth Warren from Massachusetts, one of the sponsors of the bill.

The other sponsors are Republican Senator John McCain from Arizona, Democratic Senator Maria Cantwell from Washington, and Senator Angus King, an independent from Maine who caucuses with the Senate's Democrats.

The legislation would bring back elements of the 1933 Glass-Steagall Act, which divided commercial and investment banking, and was repealed in 1999.

There were calls to bring back Glass-Steagall immediately after the financial crisis, but the 2010 Dodd-Frank financial reform law stopped short of busting up companies and instead curtails Wall Street's risk-taking.

The debate was revived last year when Sanford "Sandy" Weill, the tycoon who built financial conglomerate Citigroup Inc into a massive U.S. commercial and investment bank, said it was time to split up the biggest banks so they can get back to growing.

The legislation introduced on Thursday would separate the operations of traditional banks with accounts backed by the Federal Deposit Insurance Corp from riskier activities such as investment banking, insurance, swaps and hedge funds.

It would include a five-year transition period and would call for penalties if companies violated the law.

Other attempts since the financial crisis to bring back Glass-Steagall have not gathered significant momentum.
 
8,352
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Joined Jun 1, 2013
Sounds like a great bill.  It won't pass though.

State government is where it's at.  And if Spitzer gets NYC comptroller, it's game over for wall street.
 
3,949
1,194
Joined Nov 16, 2001
What can I do to try and get this passed?
Write your congress person, get a petition started.

If someone has the time here, let's get a petition started to the White House to get a response to this. I'm sure with the recent Republican attempts in the house to ease the housing side of the mess and the Democratic members in the senate who oppose the large banks (hopefully) that some noise can at least be made with this before we have to go through this again.
 
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Joined Jan 4, 2008
Absolute nonsense. This will destroy the competitiveness of many US banks in the investment banking business, which brings in a huge amount of revenue. Foreign banks would pick up where we were forced to leave off and simply dominate the marketplace. Congress needs to get real and understand punishing banks for size is not going to solve anything, it's only going to hurt domestic banks. Congress needs to focus on the actual activities these banks are involved in, not just their size.
 
3,949
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Joined Nov 16, 2001
Absolute nonsense. This will destroy the competitiveness of many US banks in the investment banking business, which brings in a huge amount of revenue. Foreign banks would pick up where we were forced to leave off and simply dominate the marketplace. Congress needs to get real and understand punishing banks for size is not going to solve anything, it's only going to hurt domestic banks. Congress needs to focus on the actual activities these banks are involved in, not just their size.
How would foreign banks pick up when our banking system is overseen by several entities? Any financial institution wanting to do business in the U.S. isn't just free to do whatever they want. There are rules & regulations in place to prevent certain activities from taking place, hence why Glass-Steigall as passed in the first place and why retail banks are required to hold a certain amount in reserves. Just because both have "bank" associated with them, doesn't mean they're both in the same business.
 
2,648
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Joined Jan 4, 2008
How would foreign banks pick up when our banking system is overseen by several entities? Any financial institution wanting to do business in the U.S. isn't just free to do whatever they want. There are rules & regulations in place to prevent certain activities from taking place, hence why Glass-Steigall as passed in the first place and why retail banks are required to hold a certain amount in reserves. Just because both have "bank" associated with them, doesn't mean they're both in the same business.
Annnnnd you have no idea what you're talking about. They aren't in the same business operationally, but the success of one division of the bank leads to the success of the others. Bank of America Merrill Lynch is a great example. They use their extremely large balance sheet (which comes from their vast deposit base) to offer extremely competitive high-yield and leveraged finance loans to clients looking at LBO transactions, debt financing, M&A financing, etc. Without that large deposit base to draw on, BAML can't remain at the top of the market in these specific loans (which are "risky", but not nearly as risky as the the MBS bubble trading / CDS securities that crashed the market in '08), which will then leave an opening for other foreign banks with large balance sheets such as RBC Capital Markets. They're not in the same business directly, but they are very much intertwined. And it also kills me that people are so upset with investment banks still when the public basically got what they wanted already. CDS trading and MBS trading ****** up the market - guess what, trading is DYING. Whether people want to believe that or not, it definitely is. This is now hurting the actual investment banking side of the business, which is much less risky than S&T, although it does come with some risk (as does any business). I can't stand people trashing IB and not knowing what the hell bankers actually DO. Such ********.
 
7,888
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Joined May 8, 2012
This bill will never ever ever ever pass :lol:

I'm gonna spare you guys the long explanation, and just say that these banks are just too big to fail. But hey, if Lehman can go down--so can GS, JPM and Citi. Right? :rofl:

Bruce, don't waste you time and energy trying to explain anything. It won't help.
 
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2,648
509
Joined Jan 4, 2008
This bill will never ever ever ever pass :lol:

I'm gonna spare you guys the long explanation, and just say that these banks are just too big to fail. But hey, if Lehman can go down--so can GS, JPM and Citi. Right? :rofl:

Bruce, don't waste you time and energy trying to explain anything. It won't help.
So true. Given your career timeline I can only imagine the bull you've already had to put up with :smh:
 
10,323
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Joined Apr 28, 2010
This bill will never ever ever ever pass :lol:

I'm gonna spare you guys the long explanation, and just say that these banks are just too big to fail. But hey, if Lehman can go down--so can GS, JPM and Citi. Right? :rofl:

Bruce, don't waste you time and energy trying to explain anything. It won't help.
Great idea! Keep people ignorant and help the bank. Smh.

we need to do away with the federal reserve.
 
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Joined Mar 13, 2008
How would foreign banks pick up when our banking system is overseen by several entities? Any financial institution wanting to do business in the U.S. isn't just free to do whatever they want. There are rules & regulations in place to prevent certain activities from taking place, hence why Glass-Steigall as passed in the first place and why retail banks are required to hold a certain amount in reserves. Just because both have "bank" associated with them, doesn't mean they're both in the same business.
Annnnnd you have no idea what you're talking about. They aren't in the same business operationally, but the success of one division of the bank leads to the success of the others. Bank of America Merrill Lynch is a great example. They use their extremely large balance sheet (which comes from their vast deposit base) to offer extremely competitive high-yield and leveraged finance loans to clients looking at LBO transactions, debt financing, M&A financing, etc. Without that large deposit base to draw on, BAML can't remain at the top of the market in these specific loans (which are "risky", but not nearly as risky as the the MBS bubble trading / CDS securities that crashed the market in '08), which will then leave an opening for other foreign banks with large balance sheets such as RBC Capital Markets. They're not in the same business directly, but they are very much intertwined. And it also kills me that people are so upset with investment banks still when the public basically got what they wanted already. CDS trading and MBS trading ****** up the market - guess what, trading is DYING. Whether people want to believe that or not, it definitely is. This is now hurting the actual investment banking side of the business, which is much less risky than S&T, although it does come with some risk (as does any business). I can't stand people trashing IB and not knowing what the hell bankers actually DO. Such ********.
I really don't want commercial banks using my deposit money to gamble in high risk loans and derivatives. The laws/regulations can't keep up with the creation of new and more complex derivatives like CDS and MBS. You may want banks to gamble with your money but I don't.

It's too dangerous when just 1 person can lose $2 billion dollars of the bank's money. http://en.wikipedia.org/wiki/2011_UBS_rogue_trader_scandal
 
3,949
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Joined Nov 16, 2001
How would foreign banks pick up when our banking system is overseen by several entities? Any financial institution wanting to do business in the U.S. isn't just free to do whatever they want. There are rules & regulations in place to prevent certain activities from taking place, hence why Glass-Steigall as passed in the first place and why retail banks are required to hold a certain amount in reserves. Just because both have "bank" associated with them, doesn't mean they're both in the same business.
Annnnnd you have no idea what you're talking about. They aren't in the same business operationally, but the success of one division of the bank leads to the success of the others. Bank of America Merrill Lynch is a great example. They use their extremely large balance sheet (which comes from their vast deposit base) to offer extremely competitive high-yield and leveraged finance loans to clients looking at LBO transactions, debt financing, M&A financing, etc. Without that large deposit base to draw on, BAML can't remain at the top of the market in these specific loans (which are "risky", but not nearly as risky as the the MBS bubble trading / CDS securities that crashed the market in '08), which will then leave an opening for other foreign banks with large balance sheets such as RBC Capital Markets. They're not in the same business directly, but they are very much intertwined. And it also kills me that people are so upset with investment banks still when the public basically got what they wanted already. CDS trading and MBS trading ****** up the market - guess what, trading is DYING. Whether people want to believe that or not, it definitely is. This is now hurting the actual investment banking side of the business, which is much less risky than S&T, although it does come with some risk (as does any business). I can't stand people trashing IB and not knowing what the hell bankers actually DO. Such ********.
I'll admit that I don't know everything about all aspects of the banking industry. However, given your statement that I bolded, why should I care that BOA should remain on top because of risky loans that forced them to take taxpayer money because they were becoming insolvent? It's their sheer size that forced the taxpayers to pay for their misfortunes. After dealing with BOA, Wells, & Chase on the mortgage size, I have little sympathy after seeing struggling homeowners try desperately to keep their homes only to be given promises and runarounds for months or years on end only to have the sheriff show up at their door. I know I'm getting off topic, but if an entity is large enough to blackmail the government into giving them money or risk taking down the economy, then a Teddy Roosevelt type approach needs to be implemented if no other protections are in place.
 
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Joined Jan 4, 2008
I'll admit that I don't know everything about all aspects of the banking industry. However, given your statement that I bolded, why should I care that BOA should remain on top because of risky loans that forced them to take taxpayer money because they were becoming insolvent? It's their sheer size that forced the taxpayers to pay for their misfortunes. After dealing with BOA, Wells, & Chase on the mortgage size, I have little sympathy after seeing struggling homeowners try desperately to keep their homes only to be given promises and runarounds for months or years on end only to have the sheriff show up at their door. I know I'm getting off topic, but if an entity is large enough to blackmail the government into giving them money or risk taking down the economy, then a Teddy Roosevelt type approach needs to be implemented if no other protections are in place.
Those "loans" weren't the things that caused BAML to go under...the CDS trading did. The loans I'm talking about have zip to do with the housing crisis, they just allow the bank to benefit from their deposit size, an advantage this legislation would take away. Large banks have a competitive advantage due to the fact that they are large. It's a relatively new style of banking called the "one-stop shop" that allows the bank to serve its client-base with a wider array of products. This legislation would destroy that, even though these products are not the same as the ones (not even really related to them) that caused the housing market to collapse.

I'm not saying no regulation should be done - banks DEFINITELY need to be regulated. But this blunt approach of "let's just take down all the BIG banks" is ludicrous and detrimental to the American banking system. Regulate what needs to be regulated so that banks can remain competitive while being less-risky. A big bank has HUGE benefits to corporate clients throughout the US.
 
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