5 Reasons Why Glass-Steagall Matters

[think]

5 Reasons Why Glass-Steagall Matters

Richard (RJ) Eskow, Writer/Editor, Bernie 2016

Posted: 11/16/2015 10:18 pm EST

The Glass-Steagall Act came up as a major point of disagreement between Bernie Sanders and Hillary Clinton during Saturday's Democratic presidential debate. The Act, which was originally enacted in 1933, separated risky trading and investment from traditional banking activities like business lending and consumer finance.

1933 -- Anthony Adverse and Magnificent Obsession were topping the bestseller lists. King Kong and the Marx Brothers were big at the box office. What does a law passed back then have to do with the 21st century economy?

As it turns out, a lot.

Bernie Sanders wants to implement a new version of the Act, which was repealed in 1999 after having been in effect for more than 75 years. Hillary Clinton, on the other hand, is not calling for its reinstatement.

Sen. Sanders is right. Here are five reasons why it is important to reinstate the Glass-Steagall Act.

1. Too-big-to-fail banks are bigger, riskier, and more ungovernable than ever

America's largest banking institutions are even larger now than they were before the 2008 financial crisis. The nation's six largest banks issue more than two-thirds of all credit cards and more than a third of all mortgages. They control 95 percent of all derivatives and hold more than 40 percent of all US bank deposits.

Simon Johnson, former chief economist for the International Monetary Fund, points out that Glass-Steagall is needed as part of a broad effort to make these banks "simpler and more transparent." Johnson also observes that:

Full article:
http://www.huffingtonpost.com/rj-eskow/yes-glass-steagall-matter_b_8579520.html

[Octafish]

1. Absolutely. And I don't want to be on the hook for all those freaking derivatives.

You know, what they used to call "Bets" before the New Deal and Glass Steagall.

As it is, without Glass-Steagall, the US taxpayer enjoys the privilege of getting to pick up the tab for the drunk swells at the Wall Street casino.

[think]

2. And now the big banks are using a loophole in Dodd-Frank to offshore derivatives to avoid regulation

They always find a way to manipulate the system...

U.S. banks moved billions of dollars in trades beyond Washington’s reach

By Charles Levinson

Filed Aug. 21, 2015, 2 p.m. GMT

NEW YORK – This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished.

“We saw strange things in the data,” said Chris Barnes, a former swaps trader now with ClarusFT, a London-based data firm.

The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.

The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in swaps rules that banks successfully won from the Commodity Futures Trading Commission in 2013.

Read more:
http://www.reuters.com/investigates/special-report/usa-swaps/

[Vincardog]

3. They find it easiest to manipulate the system when they are in charge of oversight