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Surprise! Glass-Steagall Comes Back To Confront Wall Street

July 19, 2016 (EIRNS)—It’s official: The call for a return to Glass-Steagall banking separation, an action which has been subject of the LaRouche movement’s intensive campaign since the fall of 2008, is not only in the Democratic Party platform, but in the Republican one as well. The language reads:

“We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment. Sensible regulations can be compatible with a vibrant economy. They can prevent the strong from exploiting the weak. Right now, the regulators are exploiting everyone.”

Whereas there was little public reaction to the inclusion in the Democratic Party platform, the appearance of Glass-Steagall in the Republican document has made Wall Street sit up and take notice. A wave of nervous commentary has appeared in the financial press (WSJ, Barrons, Bloomberg, Market Watch, as well as CNBC, etc.) and got the bank lobbyists into action. The lead bank lobbyist quoted by everyone is former G.W. Bush Assistant Secretary of Treasury, now Hamilton Place Strategies’ Tony Fratto who rushed to say

“Glass-Steagall is dumb politics and dumb economics. If Republicans think they can outflank Sen. Warren they are delusional. Returning to Glass-Steagall would be destructive and unworkable. As every analysis has demonstrated, Glass-Steagall would have done nothing to prevent the crisis. There is a lot in this platform to ignore.”

Brian Gardner from Keefe, Bruyette & Woods issued a note warning that Wall Street should not dismiss the possibility of Glass-Steagall passage (cited in different parts by WSJ and Barrons):

“There could be a unique political coalition forming to make changes to Dodd-Frank while at the same time reinstating the old separation between commercial and investment banking... There is an unappreciated risk that Glass-Steagall might be reimposed in 2017 or 2018, especially if Congress seriously looks at changes to the Dodd-Frank Act. We think this is the case regardless of who wins the presidential election.”

Amidst the refrain that political platforms are non-binding and often don’t get implemented, Wall Street has to acknowledge that Glass-Steagall has been adopted by both parties because its national sentiment.

Barrons’ writes:

“The Democrats and Republicans are in agreement on one thing in this presidential election, and of all things, its about banking regulations. Both parties, it seems are calling for a return of Glass-Steagall, a Depression-era banking law whose repeal on 1999 is credited by some for causing the financial crisis.”

The Hill:

“Both major political parties are now calling for an overhaul of the financial industry through the return of Glass-Steagall, a Depression-era banking law.... [T]he embrace of Glass-Steagall by both parties is a telling indication of how unpopular Wall Street remains with the public, years after the financial crisis...”