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Breaking the Glass Ceiling
Well, you sort of knew it was coming in some form or another. That form happened to be the Banking Integrity Act of 2009. Think of it as "Glass-Steagall II."
For the unwashed, and among other things, the original act created the FDIC and separated the practice of "investment banking" and "commercial banking." The concept was intended to avoid the conflicts of interest that purportedly arose when the same Wall Street shark was responsible for both the growth of your long-term savings and the sale of securities (underwritten by self-same shark's bank, most likely). It's effect was, as might be imagined, debatable.
Bloomberg reports today that the concept is, once again, making the rounds and points us to a document on Thomas:
Banking Integrity Act of 2009 (Introduced in Senate)
S 2886 IS
111th CONGRESS
1st Session
S. 2886
To prohibit certain affiliations (between commercial banking and investment banking companies), and for other purposes.
IN THE SENATE OF THE UNITED STATES
December 16, 2009
Ms. CANTWELL (for herself, Mr. MCCAIN, and Mr. FEINGOLD) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To prohibit certain affiliations (between commercial banking and investment banking companies), and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Banking Integrity Act of 2009'.
SEC. 2. RESTORING LIMITATIONS ON FINANCIAL INSTITUTION AFFILIATIONS.
(a) Limitation on Affiliation- The Banking Act of 1933 (12 U.S.C. 221a et seq.) is amended by inserting before section 21 the following:
`Sec. 20. Beginning 1 year after the date of enactment of the Banking Integrity Act of 2009 , no member bank may be affiliated, in any manner described in section 2(b), with any corporation, association, business trust, or other similar organization that is engaged principally in the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation stocks, bonds, debenture, notes, or other securities, except that nothing in this section shall apply to any such organization which shall have been placed in formal liquidation and which shall transact no business, except such as may be incidental to the liquidation of its affairs.'.
(b) Limitation on Compensation- The Banking Act of 1933 (12 U.S.C. 221 et seq.) is amended by inserting after section 31 the following:
`Sec. 32. Beginning 1 year after the date of enactment of the Banking Integrity Act of 2009, no officer, director, or employee of any corporation or unincorporated association, no partner or employee of any partnership, and no individual, primarily engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicate participation, of stocks, bonds, or other similar securities, shall serve simultaneously as an officer, director, or employee of any member bank, except in limited classes of cases in which the Board of Governors of the Federal Reserve System may allow such service by general regulations when, in the judgment of the Board of Governors, it would not unduly influence the investment policies of such member bank or the advice given to customers by the member bank regarding investments.'.
SEC. 3. PROHIBITING DEPOSITORY INSTITUTIONS FROM ENGAGING IN INSURANCE-RELATED ACTIVITIES.
(a) In General- Beginning 1 year after the date of enactment of this Act, and notwithstanding any other provision of law, in no case may a depository institution engage in the business of insurance or any insurance-related activity.
(b) Definition- As used in this section, the term `business of insurance' means the writing of insurance or the reinsuring of risks by an insurer, including all acts necessary to such writing or reinsuring and the activities relating to the writing of insurance or the reinsuring of risks conducted by persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons.
Welcome back to 1933.
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haha... McCain introducing an act on "Banking Integrity".
Oh, this is so classic. Although Glass-Steagall does need to be re-enacted. Let's face it... oh that caused a nice pop in the long bond.
McCain is a real piece of work. Remember when he spear headed "torture" reform with the Bush Admin that actually expanded the definition of torture and gave the administration numerous loopholes they didn't previously have?
This has nothing to do with Republicans or Democrats and everything to do with manipulation, power and control. There is one political party in America with two different factions. Other than some superficial differences, mostly there to polarize and divide the population, they act as one.
More and more I believe that the time for a new American revolution is coming.... it's such a shame that our leaders are unwilling to stop sucking the proverbial Banker dick.
@phaesed
"Although Glass-Steagall does need to be re-enacted. "
Why not? Unless you are arguing no regulation / no subsidies, I don't think it's debatable.
Well, I don't believe that there should be any type of Government subsidy for corporations of any sort. How people can back our Government supporting a corporation but can't back better education or healthcare is ridiculous. Welfare for the Rich is how I view that.
I was just pointing out how funny it is that it's John "Keating 5" McCain leading banking reform.
http://en.wikipedia.org/wiki/Keating_5
@ phaesed
Thanks for the follow-up. I understand. I'd rather no subsidy / no regulation, but that seems unlikely in a social democracy. We'd be better off if the Congress would end the FBR and the Treasury would take control of the money issuance. The banking regulation should come from depositors and investors. End the FBR, end the FDIC. Anyone who thinks the social safety net and alphabet soup of government agencies are a net positive is going to be spending a lot time defending the current arrangement.
Don't forget that Feingold is involved here, too.
My take on this is that the Banks know that they're going to go bust. Once they do, their political capital goes negative, and they will have a hard time getting the laws passed that benefit them. So they trot out the best law that can help them make the most money, put "Reinstate Glass-Steagall" on it, and go crying all the way to the Bank.
Come on, wake up. If you didn't realize that the P.A.T.R.I.O.T. act was about stripping your Constituational Rights, and not about keeping you safe, then you're going to get fleeced yet again. This is how The Game is played. Just look at the players on this one.
And this Bill is perfect. It will not only end up enriching the Banks, but it will also give the Republicans the mantle for restoring the system when Obama goes down to defeat in 2012 due to his mishandling of the economy.
With McCain-Feingold campaign finance legislation about to be gutted, I think that duo's credibility on big legislative endeavors is severely diminished. I hope against hope that a bill of this mold can become law (again), but it is a bit discouraging that this duo is leading the charge.
Without passing any judgement on the legislation itself, it just really looks bad to have your marquee reform a breath away from being declared unconstitutional. http://en.wikipedia.org/wiki/Citizens_United_v._Federal_Election_Commission
hunh.... thanks for posting this.... I find it interesting that it's linked to the Tilman Act of 1907..... (another large stock market crash year) which prohibited corporate contributions to elections.
Throw a dog a bone ...whats he gonna do
Chase and Citibank announced via their websites that they are no longer participating in (Federal Deposit Insurance Company) FDIC Transaction Account Guarantee Program. Both banks are still insured under the general FDIC program, however.Dropping out of the program means that the banks don’t have to be quite as strict with their banking procedures. What are all these rules that a bank doesn’t have to follow if they drop out of the program? If a bank decides not participate in the Transaction Account Guarantee Program, they no longer have to certify that they compliant in section 4(k) of the Bank Holding Company Act (4(k). What are 4(k) compliant activities?
Any bank not participating in 4(k) compliant activities means a bank can invest in any company, risky or not, or financial in nature or not. Which means they are taking your money and perhaps gambling with it. They are just trying to duck out of government regulation:
From: http://www.creditinfocenter.com/wordpress/
I don't have a problem with that. If your bank is engaging in unregulated high risk activities, and you go ahead and bank your funds there, I don't want to be guaranteeing your assets with taxpayer funds.
Just because the FDIC was created ostensibly as part of the solution doesn't mean it isn't part of the problem. It's an agent of moral hazard.
And besides, your 'guarantee' is much less a guarantee than you might believe. Most depositors are actually fourth in line for their funds to be guaranteed. The first two essentially go to FHLB claims, the third being to the administration of the fund guarantees, then your funds. If the money is used up by those first three claims, you are shit out of luck.
FDIC should be abolished. If you want safer banks, get rid of cartelizers like the FED and moral hazard guarantors like the FDIC.
Here is one main reason for bringing back Glass-Steagall : More jobs. More companies means more duplicate work, which in turn means more jobs. The by-product of demergers would be "no one would be too big to fail", "less risk to tax payers" etc etc, but we don't care about those anyway.
The return of Glass-Steagall is absolutely necessary to restore some semblence of law and order to the banking and financial industries. Boring, safe banking on the one hand, tightly regulated, and backed up by the public, where failure is "responsibly" backstopped as the price of system stability, and on the other hand, exciting, but risky and relatively unregulated investment banking, backed up by private capital, which, if need be, is allowed to fail spectacularly so as to ensure valid pricing of risk, and justify reward when earned. This is not hard, people.
Gotta love the guys who think up the names of these "acts." How do you vote against a "Patriot Act" or a "Banking Integrity Act." Love to see the resumes . . . "Legislative Naming Consultant, 1997-2005, Washington, D.C."
My congressman introduced a few bills during my time with him. Most the time a bill is named by the communications director or cheif of staff, but some of the less important ones they toss out to the staff for ideas. I have to say there is nothing in this world more fun (from where i'm sitting on a monday :-P) than coming up with clever acronyms that will be in the Congressional Record.
Thank you for reminding us why government people are often such a waste of our money.
Too bad one has to lose $Trillions in order to find out
the system structured as it is does not work properly....
Banking and securities have two separate purposes....
The next step is to finish the construction of a RETAIL focused worldwide direct access defragmented exchange....
Furthermore.....
No account minimum.....
Margin 4:1
Overnight and intraday
No uptick rule
No stock locates
SS supply limited by outstanding share number
Restrictions on share percentages daily buy/sell quantities on large accounts....
Transaction costs no more than 20 cents per 100 units....
One can attain this today....
Securities information.....wiki fact based
Managers...."public".....must publish performance
a matter of public record....
..................................
Banks totally separated from securities business.....must be local....and have skin in the game....
End passing the feces in securitization via brokers....
End the rating agencies....replace with wiki format third parties....
.....................................
No taxes on securities of any kind ......
Capital needs to be universal and efficient....with no
advantages to other countries....
It's frustrating, but I doubt anything will ever change. If something gives humans a dime today but costs them a dollar next year, ninety percent of them grab for the dime.
The ringleaders manipulate the masses, too, telling them if they grab the dime today, it will not cost them a dollar next year, but in fact save them two dollars.
People love the idea of something for nothing. Powerful people know this, and use it manipulate the masses. Maybe outlets like ZH can help change things, but I'm not holding my breath.
Supposedly we learned all that once. Somehow the act was repealed.
It will probably pass because it benefits GoldmanSachs.
Will the new Glass-Steagel have the same teeth as the old one??
I will believe that when I see it. Fuck the bankers and Fuck Congress.
Repeal of the Glass Steagal by Rubin, Clinton and thier Wall St. cronies is the single most cause of today's financial crisis. We need Glass Steagal, Paul Volker and high interest rates. Reinstating its intended purpose can only hurt the Wall St. crooks.
"The concept was intended to avoid the conflicts of interest that purportedly arose when the same Wall Street shark was responsible for both ..."
In other news: the sun purportedly rose in the east today.
We repeal Glass-Steagall and we get the current mess? I've not seen a better proposal than reinstating it in some form. Human beings are not the perfectly rational and honest little machines that some economic theorists seem to think they are. We're a sour bunch of curmudgeons who shouldn't be trusted without a gun to our head.
If preserving Granny's savings means telling the children on Wall Street to go to hell, so be it. They've created this backlash. They get to live with it. They're lucky things haven't gone French on their necks.
I'm no fan of the megabankers, believe me, but I hope you are including the FED and the FDIC and the SEC and all the other captured organs that created this mess too. As for Glass-Steagall resurrection, I think we'd go a long way to eliminating the problems it addresses by simply abolishing the fractional reserve. As evil as some of the financial companies appear to operate, their freedom to do so would be quite constrained without being able to loan money that didn't exist until they loan it.
Let's see... $300MM+ (and counting... the stuff you can count that is!)... of political contributions from our bankster buddies says this bill dies a painful death of 1000 cuts...
Just sayin'
Does Wall Street like it? No? Then it's good.
Gee, Who WASN'T Bribed?
Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress' most powerful members, Pete Sessions.
``I love you and believe in you,'' said the e-mail sent on Feb. 17. ``If you want my ear/voice -- e-mail,'' it said, signed ``Pete.''
Heh, now that's innocent, right?
Let's talk about what's going on here, because this is not limited to a handful of interests - it is in fact widespread and part and parcel of the corruption that has swept our nation.
The "revolving door" game - and the so-called "perks" of being a lawmaker, including the ability to travel to exotic (and expensive) places on the dole of others - has always been an issue.
In the last 20 years it has become completely out of control.
And let's remember, he is accused of basically stealing the money.
Now tell me how different this is from Henry Paulson showing up at the SEC's office to press for, and receive, a removal of leverage limits from the Investment Banks - an act that then allowed big Wall Street firms to package up trash loans into securities, shop ratings to get that coveted "AAA" and then sell them off to unsuspecting rubes - who in turn took huge losses in 2007 and 2008?
I argue there is no difference.
There is a fine line between a "campaign contribution" and a "bribe". The law defines it in one place - an explicit "quid pro quo."
http://tinyurl.com/y8jzz37
A reenactment of Glass Steagall.....
Would not be a step back....but a step forward....
..............................
Let's keep this in mind....
What would be the best way to distribute wealth throughout the world....such that it makes no difference as to what country one lives in....ie true globalization....
A great marketplace is one whereby a RETAIL account that may be US..Indian..Chinese..Russian..Brazilian....and all the rest....
Could through a trustworthy fact based wiki system....peruse and engage in the participation of wealth ....just as efficiently with $50 as with $5 Million....
Herein lies the most perfect marketplace.....hundreds of millions of small accounts that are willing....in the currency and language of choice....no matter the origin of hte company.....
It is all about the meritorious idea....and participating....
This is a zillion times better than the BlackRocks or GS's basically mucking up the marketplace ....
And with 0 taxes of anykind.....would indeed bring about innovation and the distribution of wealth at a faster pace than any other means....
That is of course unless one wishes that the government should own everything....
I think not....
Time to invoke a new Glass Steagll to tame the GS's of the world....and to hand true capitalism back to the masses....
I'm totally on board here. Why make any changes when you've already got a good thing going? These populist measures will be the end of us.
I am all for Glass-Steagall. Bring it back.
But this is NOT at all a "too big to fail" problem.
Of the roughly 150 bank failures, more than 100 have been <$1B in assets. So then prob all but 10 were <$5B in assets. Its a debt/deflation policy problem and combined with mtm accounting was a recipe for a total wipeout. In the end, this just created opportuity to take risk (homes, HY, stocks) and risk takers are now up ~100% since last year but hey, the volatility is not that functional.
The government should work toward stability... thats what some basic regulation is for. We dont really want an "unregulated" society... that was the mindset 2000-08. Ha!
I feel the top of the pyramid in our society have forgotten the concept fear/risk. Look at Madoff/Tiger/Clinton/GS ( just some names). They have made a mockery of the system they live in. I doubt any one of them would ever come out and apologize for their transgression. Just shameful.
"Leverage the balance sheet", "Power of the platform (integrated banking)", "One-Stop-Shopping"
It didn't work. Too big to fail = Too big. The mutant dna formed when commercial loan sharks met securitizing sleazeballs needs to be washed out of the banking gene pool. Goldman can spin off their prop desk and go take deposits in Utah as a real bank.
Make the loan, own the loan.
Someone should revisit 15c3-3 as well.
Problems were originally solved with the passage of Glass-Steagall. However what is fixed can be un-fixed. It took a couple of generations before people were sold the belief that Glass-Steagall "stifled competition" and had to be repealed.
Bring back Glass-Steagall? Why bother? We are so screwed now nothing will save us.
Re-install Glass-Steagall . Revoke mark to market dammit I'm short the market. Until they either revoke mark to market or put some kind of limits on it, leverage limits on capital will mean nothing.
I don't see what is so difficult or inappropriate in making banks unable to fraudulently approve loans for securities they underwrite.
Where did you ever dream up the idea that its effect was debatable? No economic genius are ye. You must have drawn your conclusions from the overall experience of 1933 to 1999 when we had no depression, only recessions, or the experience of 2000 to 2008, when it was bubble city and its aftermath?
It's basic conflict of interest. Banks are tempted to use their approval of loans to do investment banking, in order to make a quick, solid short-term profit and then not give a damn about what happens down the road long-term.
It's simply outlawing the temptation to fraud, or the gates that open the flood to massive fraud as occurred in the past 10 years.
Another example: making it illegal for credit agencies like Moody's to favorably rate securities as AAA when they are junk quality. The commercial banks were in essence doing this, only going a step further by then giving them the money to invest in trash, knowingly. WHAT IN THE HELL IS WRONG WITH OUTLAWING FRAUD OR A MAIN IMPETUS TO IT? WALL STREET, YOU HAVE LOST ALL SENSE, AND NOW YOU SEE WHY YOU ARE EXPERIENCING THE PROBLEMS YOU ARE AND HAVE YET TOO, ON ANY SECOND LEG DOWN.
The only reason "it's 1933 again" is because it was the roaring 20s and 1929 again. Will you never learn? For more, see my blog, http://www.wrathofmcgrath.com
Time to tighten up captcha.....
Well see; the problem with approximately 99% of the people in the good ol US of A is that they STILL uphold constitutional principles which were set fort 230+ years ago. Principles which were enacted while there was no knowledge about resources, geo-political landscape, dynamic political environment, dynamic economic environment etc. Now; i am the last person to argue about the underlying enlightenment paradigm which is the ground for the US constitution and the Bill of Rights ( as many of you know i hold certain enlightenment teachings in high regards ). But the ultimate goal of being free ( which is THE most important part of the so called " American exceptionalism " ) was based on duality which is so firmly set in within the enlightenment philosophy; first of all it denounces every form of non-materialistic form in order to liberate Humanity from any form of theocratic or royal governance ( or both ) while on the other hand it preaches idealistic abstraction in the from of freedom, happiness and rights. While the US forefathers did not make a clean cut in breaking those bonds they did insure that, what would latter become "irrational approach to the Human Condition (past, present and future ) marks the " Freedom Space " of its citizenry. And, naturally, capitalism thus came as the only compatible theory/ideology cleansed from speculative metaphysical ground ( that is if we don't take into mind that little thing known as the " Invisible Hand " upon capitalism itself is built upon and which " allows " the lack of regulation because " the market knows best "). Thus while the arche-American politics is still very much alive in the USA ( and propagated by Ron Paul and the likes ) it is firmly set upon irrational and anthropocentric belief in superiority of the human mind. So I can only conclude that any regulation the like of Glass-Steagall is rational, fair and most importantly needed if for nothing else then for purely philosophical and theoretical reasons. But since those reasons are not near enough for conviction on the reinstatement of GSA, i would like for all of you who think that the return of the GSA is harmful to observe the period between 1933-1999 and the period between 2000-2009.