Democratic Sen. Elizabeth Warren of Massachusetts and Republican John McCain of Arizona have re-released their legislation that would resurrect the Glass-Steagall Act of the 20th century, which regulated how banks are allowed to conduct their business.
The original Act was passed in 1933 and remained in existence for six decades before being repealed by former President Bill Clinton in 1999. At the time, Clinton said the Act was no longer needed to regulate the banking industry and, by the late 1990’s, was outdated.
However, many critics blame the Clinton administration’s repeal of the Act on the 2008 economic collapse, saying the Glass-Steagall Act prevented big banks from putting money into risky investments.
Originally introduced in the 113th Congress (2013-2015), the bill would “clarify regulatory interpretations of banking law provisions that undermined the protections under the original Glass-Steagall” and would make those banks that are “too big to fail” smaller, allowing them to operate more safely, Think Advisor reported.
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Ultimately, the legislation is meant to separate banks with checking and savings accounts and are insured by the Federal Deposit Insurance Corporation (FDIC) from “riskier financial institutions” that offer additional services, such as investment banking and insurance.
“Despite the progress we’ve made since 2008, the biggest banks continue to threaten our economy. The biggest banks are collectively much larger than they were before the crisis, and they continue to engage in dangerous practices that could once again crash our economy,” Warren, a strong supporter of government oversight over the banking industry, said in a statement.
McCain also made a statement in favor of the legislation, blaming the Clinton administration’s appeal of the original law to leading to “a culture of dangerous greed and excessive risk-taking.”
“Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits,” he added.
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The Hill reported that former Clinton staff members disagreed with McCain and Warren’s claims, saying the repealing the legislation did not lead to the economic collapse.