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PRESS RELEASE


Bloomberg Notices ‘Glass-Steagall Back in Washington’

Sept. 28, 2016 (EIRNS)—As Deutsche Bank’s unravelling terrifies the financial world, Wall Street’s Bloomberg Radio program, "Bloomberg Law," interviewed two U.S. professors yesterday morning on "the potential return of the Glass-Steagall Act." Bloomberg noted that discussion of the 1933 act was kicked up in the presidential campaign, and "Glass-Steagall has received even more support" after the Wells Fargo affair, "renewing calls to either reinstate the act or break up the banks altogether."

Cornell University Law School’s Robert Hockett answered the question: What do people advocating Glass-Steagall’s return expect to accomplish? Hockett cited three other functions accomplished, in addition to the common understanding that Glass-Steagall protected depository (commercial) banks from the exposure to risk from affiliation with investment banking. The law limits access to cheap funding which some "high-roller Wall Street firms" get. It also would limit the complexity of the banks, enhancing "governability" of the banks by management and regulators; the debacle at Wells Fargo is an example of what happens when banks are too complex, he said. Lastly, the law has a political economic function as well: to render banks less gigantic, and thus less able to write their own regulations, and so remove the fox from the chicken coop.

Asked by Bloomberg about the Federal Reserve’s recent call for restoring part of Glass-Steagall, Wayne State University professor Peter Henning called the Fed’s proposal "Glass-Steagal lite," essentially a proposal to restore the Volcker Rule, and increase its power to curb the size of the banks. Henning raised the absurdity of "banks" like Goldman Sachs owning warehouses of commodities.