Expanding Support for Glass-Steagall
June 7, 2012 • 9:11AM

Rep. Judy Chu (D-CA32) has become the latest co-sponsor of H.R. 1489, making her the 65th Member of the House to formally support the reinstatement of Glass-Steagall.

In Utah, Dan Liljenquist, a Tea Party-backed Republican challenging Sen. Orrin Hatch of Utah in the GOP primary, said he supports reinstating Glass-Steagall, at a town hall meeting on Saturday in Provo. Liljenquist, a former consultant for Bain Capital, was asked, "Are you in favor of re-instituting Glass-Steagall?" He answered: "I am in favor of re-instituting Glass-Steagall, but let's take it offline. It's very complicated for most people." In response to another question, he said: "I'd reinstate Glass-Steagall. We'd put the wall back up between investment banks (think Goldman Sachs) and deposit banks (think Wells Fargo)."

Economist Joe Stiglitz, interviewed on NPR's "Fresh Air" on June 5, cited the repeal of Glass-Steagall as a major cause of the financial crisis. When asked about the impact of lobbying on financial regulation, he answered: "I think the example that most epitomizes the problems that I've been talking about was the repeal of the Glass-Steagall Act... After the repeal of Glass-Steagall, the differences between the investment banks, which took rich people's money, invested in high-risk activities, high return, the difference between those banks and ordinary commercial banks was abolished, and the unfortunate consequence of that was that the commercial banks began to act like investment banks, undertaking high-risk activities with ordinary individuals' money. "It had two other consequences," Stiglitz continued. "One was that the banks grew bigger and bigger. They became too big to fail."

Stiglitz stated that Glass-Steagall "served the country well," explaining: "In the decades following the passage of this... the United States had no financial crises, no major bank failures. In the period after deregulation, we've seen the kind of instability that we face."

Rich Elfters, columnist for Enumclaw (WA) Courier Herald, called for reinstating Glass-Steagall in a June 4 column, in which he wrote about FDR's measures in 1933 — the bank holiday, FDIC Act, and Glass-Steagall — and continued: "For 66 years, until 1999, this law functioned well, until with the push from Federal Reserve Chair Alan Greenspan, Secretary of the Treasury Robert Rubin, and some large financial institutions, the law was dropped." Elfters, a former teacher, writes of its repeal: "Having taught about the causes of the Great Depression for more than 20 years at that time, I wondered what effect that decision would have upon the economy. We all found out in October 2008 when the economy went into a tailspin... My fear is that not having a Glass-Steagall type provision in place will lead to a repeat of the 2008 economic disaster. Unless Congress and the president act to reinstate a form of Glass-Steagall, we will see a repeat of the 2007-10 fiasco."