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Spectrum - Friday, July 9, 2010 Send this story
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During the Great Depression in 1933, the act that was passed — the Glass-Steagall Act and the bank act that was a part of that — transformed the landscape. It disallowed banks to take risks and hold our customer deposits. And it gave an incentive to banks who held deposits that they would be supported by the government, that the FDIC was created to back our money. But then they would also not be allowed to speculate and trade and create esoteric, complex instruments that are difficult to understand and don't have a market and can collapse an entire economy. That was a big bill.
1956 there was a Bank Holding Act. That said banks can't merge across state lines, they can't buy insurance companies, they can't by investment banks. They want to do plain banking, they do plain banking.
That was as a solidification of the Glass-Steagall Act. That was strengthening the act.
This latest banking bill does none of that. This allows all of that complexity; it allows banks to hold insurance companies and investment back and trade and speculate and have government backing for deposits.
Two major things were not addressed in the new bill, the most important things. First of all, it does nothing to put the firewall back up between regular banking commercial activity and those investment firms on Wall Street. That distinction was critical to protect all of us from this kind of collapse. This bill does not fix it.
The second thing is that it does not do anything serious about these institutions, these investment companies and others that are too big to fail. And too big to be safe for America. It does not handle that. So the two biggest issues are not resolved.
Pretending this is somehow the kind of reform we needed to avoid the financial collapse is really not being honest with the American people.
Ted Rudow III,MA