Democratic State Senator Perry Clark introduced the following resolution into the Kentucky State Senate on February 11.
A RESOLUTION urging Congress to reinstate the separation of commercial and investment banking functions which were in effect under the Banking Act of 1933, commonly referred to as the Glass-Steagall Act.
WHEREAS, the United States Congress in response to the failure of one in five commercial banks in the preceding months enacted the Banking Act of 1933, which established the Federal Deposit Insurance Corporation and which separated commercial and investment banking functions; and
WHEREAS, Congress later enacted the Bank Holding Company Act of 1956, which prohibited bank holding companies from engaging in insurance activities; and
WHEREAS, over the intervening years the laws establishing a firewall between traditional commercial bank lending and deposit functions and investment banking, securities underwriting and insurance company functions have been collectively referred to as Glass-Steagall Restrictions by economists and the press; and
WHEREAS, beginning in 1987 the Glass-Steagall Restrictions upon commercial banks were gradually removed by loosening regulations promulgated by the Board of Governors of the Federal Reserve and ultimately by their repeal with the enactment of the Gramm-Leach-Bliley Act in 1999; and
WHEREAS, following the removal of the Glass-Steagall restrictions investment banks, commercial banks, mortgage companies, insurance companies and other financial service companies have merged, creating vast financial conglomerates considered too big to fail; and
WHEREAS, many of these financial services companies invested in or guaranteed toxic sub-prime and Alt A mortgage backed securities, collateralized debt obligations, and undertook perilous positions in derivative transactions; and
WHEREAS, the collapse of the housing bubble led to massive investment losses bringing many of the nation's largest financial services companies to the brink of failure; and
WHEREAS, many of these entities were bailed out by the United States Treasury at a cost to American taxpayers of hundreds of billions of dollars; and
WHEREAS, legislation was introduced in 2009 and 2010 to reinstate the Glass-Steagall restrictions; and
WHEREAS, within the hundreds of pages of the Dodd-Frank Act there are no prohibitions preventing too big to fail financial services organizations from investing in or undertaking substantial risks in trillions of dollars of derivative contracts; and
WHEREAS, the American taxpayers continue to be at risk for the next round of banking failures with enormous risks undertaken by these financial service conglomerates;
Be it resolved by the Senate of the General Assembly of the Commonwealth of Kentucky:
* Section 1. The Kentucky State Senate urges the United States Congress to enact legislation to reinstate the Glass-Steagall restrictions to prohibit commercial banks and bank holding companies from investing in stocks, underwriting securities, investing in or acting as guarantors in derivative transactions in order to prevent American tax payers from again being called upon to fund hundreds of billions of dollars to bail-out financial institutions.
* Section 2. The Clerk of the Senate shall transmit a copy of this Resolution to the President of the United States, The President of the United States Senate, the Speaker of the United States House of Representatives, the President of the Senate and the presiding officer of the house of representatives, state assembly or house of delegates of each state in the United States of America, and to each member of Kentucky's Congressional Delegation.