Growing Support for Glass-Steagall,
June 15, 2010 (EIRNS)Two regional Federal Reserve presidents, Thomas Hoenig of Kansas and Richard Fisher of Texas, have written letters to Sen. Blanche Lincoln (D-Ark.) supporting her anti-derivatives provisions, which are included in the Dodd financial reform bill. It is well known that the Obama Administration, on behalf of Wall Street, is doing everything possible to have Lincoln's provisions removed, perhaps to be substituted for by the weak so-called Volcker Rule. Lincoln's victory in the hotly contested Democratic run-off primary election June 8, has made this more difficult, however.
Then, two days later, the Federal Reserve local presidents weighted in. Hoenig wrote, in his letter:
"As you know, commercial banks are the trusted guardian of depositors' funds and the primary intermediary of the national and global payments systema role that is critical to our country's financial and economic stability. I have been a long-time proponent of limiting the derivative activities of commercial banks to only those designed to mitigate the institution's balance sheet risk. Accordingly, I support the reinstatement of Glass-Steagall-type laws to separate higher-risk, often more-leveraged, activities of investment banks from the commercial banking system."
According to an article in the Huffington Post of June 14, more regional Fed presidents are expected to join Fisher and Hoenig.
Meanwhile, the conference committee tasked with reconciling the House and Senate "financial reform" bills has begun its discussions. Notable in its first meeting, June 10, was a statement by Democratic Sen. Tom Harkin of Iowa, who stressed how the Depression-era Glass-Steagall Act had protected the U.S. against financial crises from the time of its enactment, through World War II, the Korean War, the 1960s and 1970s, Presidents John F. Kennedy and Ronald Reagan, until its undermining and eventual repeal in the 1990s. He said the resulting "stew" of commercial banking, investment banking and insurance had "made us sick.... You can put the genie back in the bottle," said Harkin. "The only way to straighten this out, is to go back to Glass-Steagall." Harkin was one of only eight Senators to oppose the repeal 1999, and is now a cosponsor of legislation to reinstate Glass-Steagall.
While the Glass-Steagall amendment of Sens. John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) is not formally before the conference committee, in principle, the Senators could act to include it. At least two local newspapers, one from Alaska and the other from Maine, have editorialized to that effect.
Meanwhile, LaRouche PAC's mobilization to get local government entities to demand Glass-Steagall reinstatement is gaining steam. On June 9, LPAC's resolution on Glass-Steagall was unanimously adopted by the Borough Council of Lansford, Pa., which is sending official copies to the local Congressman and to the two U.S. Senators, plus Cantwell, McCain, and Lincoln, and is also putting out a press release in the area. The same council had previously passed a resolution in support of LaRouche's Homeowners and Bank Protection Act.