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Big Banks Fight Glass-Steagall To End in Delaware as Bills Gain Traction in D.C.

July 4th, 2013

By: Kenric Ward

DOVER, Del. — Under heavy pressure from the banking industry, Delaware state lawmakers wind up their 2013 session Sunday. Lobbyists from J.P. Morgan Chase and Bank of America weighed in against Senate Resolution No. 8, which would add Delaware to a lengthening list of states supporting national reinstatement of the Glass-Steagall Act.

The measure's fate remains unclear in Dover, but a bipartisan group of legislators, including leading Senate Democrats, remains committed to the resolution.

The Glass-Steagall campaign got a boost from New Castle County Executive Thomas Gordon, who praised the resolution sponsored by state Sens. Bruce Ennis and Robert Venables Sr., urging the U.S. Congress to restore the wall of separation between commercial and investment banking.

The Federal Banking Act of 1933, known as Glass-Steagall, walled off commercial bank deposits from speculative investment brokerage houses.

Glass-Steagall's repeal in 1999 preceded the megabank mergers of the early 2000s, which gave birth to the concept of too big to fail — and the multibillion-dollar government bailouts that ensued.

This was one of the major unravelings, Gordon noted.

New Castle County Chief Administrative Officer David Grimaldi added that Glass-Steagall had prevented major financial meltdowns from occurring since the Great Depression.
Financial panics and economic depressions were fairly common during the century which preceded the Great Depression, occurring at a rate of one every 20 or so years, said Grimaldi, who formerly worked for Morgan Stanley, J.P. Morgan Chase's investment bank on Wall Street.

The Glass-Steagall Act contributed to an era of relative financial stability which sadly came to an end with its repeal.

Grimaldi said it was important for Congress to take precautions since he believed there was an elevated probability of another correction or crash.

Both in duration and magnitude, the current equity bull market has become long in the tooth. Grimaldi said. It is critical that Congress take proactive measures to mitigate the risk of another financial collapse. Reinstating the Glass-Steagall Act would be an important step.

So far, lawmakers in four states have passed bills calling for Glass-Steagall's return. Similar measures are pending in Rhode Island, Pennsylvania, North Carolina, New Jersey, New York and Delaware.

In Washington, D.C., Glass-Steagall bills have been introduced in both the House and Senate.

Rep. Marcy Kaptur, an Ohio Democrat who co-introduced H.R. 129 with Rep. Walter Jones, R-N.C., said, The protections in Glass-Steagall are meant for individuals, families and communities.

The biggest banks are more interested in speculation to drive their short-term profits than following prudent banking practices that work for everybody.

We know. We're still climbing out of the crater that Wall Street created.
H.R. 129 currently has 66 co-sponsors.

Lyndon LaRouche, whose political-action organization is a prime proponent of financial reform, said, "This country has no chance of survival without an immediate return to Glass-Steagall.

"The U.S. is already hopelessly bankrupt. As long as we continue with the hyperinflationary bailout polices of (Barack) Obama and (Fed Chairman Ben) Bernanke, you are as good as dead, LaRouche said.

The choice is between killing the gambling debts or killing American citizens, as the citizens of Cyprus, Greece, Spain, Portugal and Ireland are already being killed by willful and genocidal austerity."

While the showdown in Delaware indicates what's at stake for big Wall Street investment banks, Glass-Steagall garnered more support this week in Washington.

Thomas Hoenig, vice chair of the Federal Deposit Insurance Corp., and former FDIC Chair Sheila Bair told the House Financial Services Committee they both endorsed re-enactment of the banking law.

Hoenig called it absolutely necessary.

Public Citizen, the Ralph Nader-founded group, released a 13-page pamphlet, "Safety Glass Why It's Time to Restore the 1930s Law Separating Banking and Gambling," in calling for the return of Glass-Steagall.

Links:
[1] http://www.examiner.com/article/big-banks-fight-glass-stegall-to-end-delaware-as-bills-gain-traction-d-c

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By: Kenric Ward Examiner.com website [1]

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