The need to reenact Glass Steagall

by Glen Wallace

If traditional banking is to be considered a vital national utility, then safeguards need to be in place to protect that utility from harm. As it is, we the people are acting as the de facto insurance company backing the banking industry.  Unfortunately, those financial institutions don't have to pay any premiums for what is effectively the world's largest insurance policy.  We the people pay out when times are bad for those banks, but we get bupkis when times are bountiful for them.  So, we should either be getting regular dividend checks or the casino side of banking and the traditional saving and lending side should be clearly and cleanly separated through the reenactment of Glass Steagall.  Another option is to start a national bank for traditional banking either as the only option or a public option.

The problem with a lack of separation between casino or investment banking and traditional banking is that there is no signs or symptoms for a long time leading up to a financial disaster caused by the lack of separation.  For instance, while there are plenty of problems faced by the general public from our private health insurance system such as high rates and poor coverage that leads the constituents to clamor for a single payer plan, there are no such problems that the general public has to face and deal with in terms of  the lack of separation between the casino and traditional side of banking -- everything seems to be going along swimmingly until disaster strikes and banks start closing and banking holidays are declared.  The lack of a Glass Steagall type legislation is not a problem until it is a huge problem.  But despite all the glaring problems with our private insurance systems, the difficulty in trying to enact something like Medicare for All leads me to think it will be nearly impossible to reenact Glass Steagall until the next banking crisis -- although I am wondering why that wasn't the first thing attempted after the fall of some big banks in 2008, instead of passing the critically weak Dodd Frank bill.