Press Release: Reps. Capuano and Jones Introduce 21st Century Glass-Steagall Act

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Print Version-Reps. Capuano and Jones Introduce 21st Century Glass-Steagall Act

PRESS RELEASE

Reps. Capuano and Jones Introduce 21st Century Glass-Steagall Act

May 22, 2017

Rep. Michael Capuano (D-MA) and Rep. Walter Jones (R-NC) have introduced the 21st Century Glass-Steagall Act to shield federally insured deposit-taking banks from riskier financial institutions such as investment banks and swaps dealers.

Congress passed the Glass-Steagall Act in the wake of the 1929 economic crash to create a wall between investment banks and depository banks that consumers rely on every day. In the 1980s the law’s regulations were weakened as the Federal Reserve and Office of the Comptroller of the Currency reinterpreted longstanding legal terms. As a result the wall between investment banking and depository banking slowly eroded. In 1999, Congress passed the Gramm-Leach-Bliley Act repealing the core provisions of Glass-Steagall. In its report on the 2008 financial crisis, the Financial Crisis Inquiry Commission concluded that, “this deregulation made the financial system especially vulnerable to the financial crisis and exacerbated its effects.”

“We know that the repeal of Glass-Steagall played a role in the 2008 financial crisis. It could happen again and to prevent that, Congress must act to rebuild the wall that protected depository banks from investment banks for decades,” stated Rep. Capuano who voted against the repeal of Glass-Steagall in 1999.

“Wall Street should not be allowed to gamble with depositors’ hard-earned money,” said Congressman Jones. “Ten years ago, that activity nearly brought down our country. America can’t afford to have that happen again.”

The 21st Century Glass Steagall Act removes unnecessary financial complexity by:

Separating traditional banks that have savings and checking accounts and are insured by the FDIC from riskier financial services, such as investment banking, insurance, swaps dealing, and hedge fund and private equity activities.
Prohibiting traditional depository banks from investing in structured and synthetic financial products, such as complex derivatives and swaps.
Reversing the regulatory interpretations of the 1980s and 1990s that were used to undermine Glass-Steagall’s protections.
Instituting a five-year transition period and penalties for violating the law.

The 21st Century Glass-Steagall Act will help bring an end to “Too Big To Fail” by making large financial institutions smaller and preventing institutions that use federal depository insurance from engaging in high risk activities. It has also been introduced in the Senate. The legislation can be found here.

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Contact: Alison Mills (Rep. Capuano) 617-621-6208

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