Citizens Electoral Council of Australia

Media Release Thursday, 21 July 2016

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

Banks panic as both major US political parties adopt Glass-Steagall banking separation policy

The Democratic and Republican parties in the USA have both adopted, for the 2016 Presidential election campaigns, the policy of reinstating the Glass-Steagall law, eight years after the eruption of the global financial crisis caused by the repeal of Glass-Steagall in 1999.

The Glass-Steagall Act 1933 was the most successful financial regulation in history. It mandated the strict separation of commercial banks that normal people use for everyday business, from Wall Street’s investment banks, insurance companies and stock brokerages—no cross-ownership, no shared directors, no contact. Under Glass-Steagall the government protected the deposits of commercial banks through the Federal Deposit Insurance Corporation; however, this protection was a backstop—the real security came from keeping the commercial banks and their deposits away from risk-taking investment banks. Meanwhile, investment banks were given the message: gamble at your own risk—if you lose, you wear it. In other words, no bank was too big to fail.

The Glass-Steagall legislation was straightforward, only 37 pages long, which allowed for next to no loopholes (in contrast with the 848 pages of Barack Obama’s loophole-ridden Dodd-Frank Act). Its success is undeniable: between the 1929 stock market crash and 1933, more than 4,000 US banks collapsed; under Glass-Steagall from 1933 to 1999, only a handful of banks failed, none of which risked a systemic collapse (the Savings and Loans collapse in the 1980s occurred after that sector lobbied for and won exemptions from Glass-Steagall); just nine years after its repeal, Wall Street’s TBTF banks triggered the biggest banking collapse since the Great Depression.

Since 2008, the need to restore Glass-Steagall has been self-evident. Even Sandy Weill, the Citigroup banker who had lobbied hardest for its repeal, admitted in 2012 that scrapping Glass-Steagall had been a mistake. The only opposition to restoring it came from Wall Street and the City of London—the bankers who caused the crisis, many of whom should be in jail rather than dictating financial regulation—and their political stooges, including Barack Obama, whose biggest financial contributor in 2008 was Goldman Sachs and who actively blocked the restoration of Glass-Steagall throughout his presidency.

Now, in this 2016 election year, Obama is not able to squash support for Glass-Steagall in the Democratic Party, which has become overwhelming. Democratic pre-candidate Governor Martin O’Malley made it his number one policy, which saw him named Wall Street’s “public enemy number one”. Bernie Sanders quickly echoed O’Malley, and it was this policy to take on Wall Street that drove his stunning support and showed up Hillary Clinton, who opposed Glass-Steagall, as the candidate for Wall Street. Sanders’ unlikely success meant that, although he didn’t clinch the nomination, he was able to shape the party’s platform. The full Democratic Party platform committee meeting in Florida on 8-9 July passed the Glass-Steagall plank by a unanimous vote. Although Hillary Clinton opposed Glass-Steagall during the primary, her team did not oppose it being in the platform.

On 18 July the Republican Party made it bipartisan: Donald Trump’s campaign manager Paul Manafort announced to reporters, “We also call for a reintroduction of Glass-Steagall, which created barriers between what big banks can do.” Wall Street is terrified. Various financial publications and institutions have whined that “There is an unappreciated risk that Glass-Steagall might be reimposed in 2017 or 2018 … regardless of who wins the presidential election”, which “would pose an existential challenge” to TBTF banks.

This bipartisan support for Glass-Steagall reflects the political revolt under way worldwide, wherein voters are forcing political institutions to reflect their real interests, specifically for a new economic system that benefits all, not just the elite few.

The CEC has long led the fight for a Glass-Steagall separation of Australia’s TBTF banks to protect depositors and force the banking system to serve the needs of normal people and the real economy. This development in the USA shows we can win that fight—join us!

Click here for a literature pack containing the CEC’s pamphlet Glass-Steagall Now! and the latest issue of the Australian Alert Service magazine, which reports on the looming crisis in the global financial system and the urgent necessity for Glass-Steagall to protect the public.

Click here to join the CEC as a member.

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