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Citizens Electoral Council of Australia

Media Release Friday, 24 March 2017

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
 

Pressure builds in USA for Glass-Steagall banking separation; when will Aus, UK catch up?

Everyone in the United States is suddenly talking about Glass-Steagall, the 1933-99 US law that protected everyday people from banking crashes, by separating commercial banks with deposits from investment banks that speculate.

Restoring Glass-Steagall is the only way to solve the growing threat from Too-Big-To-Fail banks, which, compared to when they were bailed out in 2008, are even bigger, and more addicted to the derivatives gambling that caused the global banking crash.

The rising fears of another crash, and the new presidential administration, are provoking the renewed political focus on Glass-Steagall.

On 15 March, a reporter asked US Federal Reserve chair Janet Yellen about Glass-Steagall: “The administration recently reiterated its support for reinstatement of Glass-Steagall. Treasury Secretary Mnuchin has called for a 21st Century Glass-Steagall. Keeping in mind that there’s no specifics on this proposal, is the fundamental idea of separating commercial banking from investment banking a fruitful line of inquiry? Is this the right path to be pursuing?”

Yellen tried to duck the issue, knowing that the Wall Street banks are hysterical about any discussion about breaking them up; however, reflecting the momentum for Glass-Steagall, she did say: “But obviously we would look at any proposals that are put forward.”

A proposal had been put forward two days earlier, in a 13 March speech by the vice chairman of America’s Federal Deposit Insurance Corporation (FDIC), Thomas Hoenig. A heavyweight financial regulator, whose FDIC was created by the 1933 Glass-Steagall Act and is responsible for protecting Americans’ bank deposits, Hoenig backed up Donald Trump’s campaign pledge for a “21st Century Glass-Steagall” by proposing a separation that requires banks to operate their investment banking divisions completely outside of any government protection (not quite full-scale Glass-Steagall, but much stronger than the ring-fencing system still being implemented in the UK, and a useful contribution to the debate).

Glass-Steagall keeps getting raised in White House press briefings. Twice Donald Trump’s press secretary Sean Spicer has reiterated Trump’s support for the law: on 9 March, in response to a question from Newsmax’s John Gizzi, who asked if Trump would work with Glass-Steagall champion Bernie Sanders on restoring the law, and if Trump remained committed to it—Spicer’s confirmation sent bank stocks falling; and on 1 February, in response to a question from Bill Jones of Executive Intelligence Review magazine. That same day, four members of the US House of Representatives introduced a Glass-Steagall bill into Congress, the Return to Prudent Banking Act, and on 19 January US Senator Maria Cantwell grilled Trump’s nominee for Treasury Secretary, Steve Mnuchin, for details of Trump’s 21st century Glass-Steagall pledge.

Global implications

Restoring Glass-Steagall in the USA would have a big impact on the global financial system. It would mean that the world’s two biggest economies have separated banking systems, as China has had Glass-Steagall since 1993. Japan would also quickly restore Glass-Steagall, as it only repealed its banking separation in 2000 under pressure from the United States.

What does it mean for countries such as Australia and the UK? Without separated banking systems, they would be left exposed to the fallout of the US$1.2 quadrillion derivatives bubble. Australia’s banks have been gambling on derivatives like crazy since the 2008 crash, more than doubling their collective exposure from $14 trillion to $35 trillion. The UK’s City of London is the casino banking capital of the world. The biggest and craziest derivatives bets that caused the 2008 meltdown were made in London, and it continues to be the centre of global derivatives gambling, hosting deals amounting to hundreds of trillions of dollars per year—10-20 times global GDP!

To date, the Australian and UK governments have resisted Glass-Steagall at the insistence of the TBTF banks, which want to keep gambling with deposits. Banking separation will only be achieved if the everyday people who will be the victims of a banking crash rise up and demand it.

Click here to sign the petition: Break up the big banks now—pass Glass-Steagall!

Click here for a free DVD of “The Hamilton principle: government should be involved in banking”, a presentation by Robert Barwick that graphically and dramatically illustrates the insanity and outright fraud involved in derivatives gambling and the other forms of speculation that are driving the financial system towards another crash.

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All electoral content is authorised by National Secretary, Craig Isherwood, 595 Sydney Rd, Coburg VIC 3058.