Bank Separation: First Legislative Initiatives Taken
As the 2008-2009 crisis broke out, many called for reinstating a Glass-Steagall type of bank regulation, separating commercial banks from investment banks. Governments decided, instead, to listen to the “financial industry”, and adopted completely inadequate measures. Since then, EIR and the Schiller Institute have consistently called for a Glass-Steagall reform, and now that the crisis is in full swing, legislators and opinion-makers in several countries are slowly beginning to heed the call.
The most important action was taken in the US Congress on March 23. Democratic Rep. Marcy Kaptur of Ohio, announced new legislation on Glass-Steagall. “Soon I will reintroduce the Return to Prudent Banking Act and I urge my colleagues on a bipartisan basis to join me. This bill will put America back on a path to fixing reckless speculation inside our banking and financial sector. As a result, no single company could be both an investment and a commercial bank. This structure worked for decades. It proved to be a sound way of creating local economic growth and limiting the systemic risks…. Depositors’s safety, not speculation, must be our objective.”
Legislators are moving in Switzerland as well, in the wake of the Credit Suisse collapse and bailout. Socialist Party parliamentary faction leader Roger Nordmann has called for resuming the 2009 “Trennbanken” (Glass-Steagall) proposal, which was rejected by the upper house Council of States in 2014. The Green Party supported the idea. The SVP, however, which pushed Glass-Steagall at the time, is now hesitant, with faction leader Thomas Aeschi telling Swiss radio SRF that “it should be evaluated whether the old proposal is still valid”.
Also emeritus banking professor Hans Geiger, in the blog insideparadeplatz blog, and economic editor Claude Chatelein, in Blick, called for Glass-Steagall.
In Germany, former chief editor of Wirtschaftswoche Roland Tichy argued for a bank separation reform in an article entitled “No more half measures?—The Credit Suisse Case Must Be Followed by a Completely New Banking Regulation,” in Tichys Einblick. Wolfgang Effenberger, a former Bundeswehr officer and book author, raised the issue of Glass-Steagall and mentioned one of the exchanges between EIR’s Claudio Celani and the European Central Bank’s Trichet on the issue, though without identifying them.
In Italy, Teodoros Dalavecuras, a business lawyer in Milan, asked the pertinent questions in Start Magazine: “Are contemporary governments able to produce effective legislations as the Glass-Steagall Act was effective at its time? Are they incompetent or are they too weak to impose effective rules? Do supervisors have personnel of the quality demanded by their tasks?”
See also Helga Zepp-LaRouche’s “Call for an Emergency International Conference To Reorganize the Bankrupt Financial System”. Diane Sare, a LaRouche independent candidate for Senate from New York State, also issued a call on March 15, titled “Bank Bailout is Illegal – Congress Must Implement LaRouche’s Four Laws”.