Senators John McCain and Maria Cantwell are proposing legislation that would effectively reinstate the Glass-Steagall type separation between investment and commercial banks.
“I’m not sure we’d call it restoration of Glass-Steagall,” McCain told CNBC.
“I think what it is is putting in (an ironclad firewall between commercial banks and investment banks.”
"The banks are there to serve the public and that's what they should concentrate on.”
“We’ve been on the hook for $700 billion dollars. … and it’s been a disaster,” McCain points out.
“If investment banks want to do whatever they want to do, that’s fine. But let’s not back it with taxpayer dollars.”
“Five of the present 7000 commercial banks hold 50 percent of the nation’s bank-owned assets. These same five entities hold over 95 percent of the risk in the derivatives markets, so they’re too big to fail, yet there have been 100 small commercial banks who are too small too save.”
Investment banks present conflicts of interest and risk, McCain notes, and trying to control the risk with supervision doesn’t work, McCain says.
He points out that that legislation going through Congress now calls for greater and greater supervision and intervention by the federal government rather than for separation of commercial and investment banks.
Pressure is certainly building in America to curtail, if not derail, the excessive risks embedded in our largest banks, notes financial writer and former Wall Street trader Larry Doyle.
One of the most informed voices calling for reinstating Glass-Steagall is former Fed Chair Paul Volcker, Doyle says.
“Although Wall Street and Washington turn a deaf ear to Volcker, America listens to him intently,” Doyle writes at wallstreetpit.com.
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