Glass-Steagall in Washington State Governor's Campaign
June 26, 2012 • 8:04AM

In the state of Washington, where the Dave Christie for Congress campaign has continually forced the issue of Glass-Steagall, at least nine Legislative Districts have called for the reinstatement of Glass-Steagall in the last year, and most recently the Democrats of King County, Washington voted to include a question of Glass-Steagall on their 2012 Candidates Questionnaire. All 96 candidates polled said they supported it.

In their first debate June 12, leading candidates for governor in the state, Democrat and former U.S. Rep. Jay Inslee, and Republican opponent Bob McKenna faced off on the "causes" of the Great Recession. McKenna (a former Attorney General involved in the recent $26 billion "clawback" settlement with Wall Street banks) challenged Inslee on the "foreclosure crisis," charging that Inslee's votes in Congress had allowed "poor people" to get loans, all of which "contributed to the housing crisis." Inslee shot back that he was 1 of 57 in Congress who voted against repeal of Glass-Steagall, and that its repeal is what caused the crash.

From Inslee's website: "Well, in fact, I voted against the deregulation of Wall Street — which really was the reason we had this financial collapse... The reason, in fact, that we have had such a titanic loss of our [home] values is we had an unrestrained Wall Street.... When Bill Clinton asked for my support — to support the deregulation of Wall Street — to in fact repeal Glass-Steagall — I said no. I voted against it. I'm a person who's willing to stand up against my own party."

Today, the issue was raised anew, and circulated in regional papers across the state, in the form of an "analysis" of the exchange, citing McKenna's "claims" and Inslee's "rebuttal." The article by Brad Shannon quotes University of Washington Prof. Alan Hess on the question of whether "deregulation" or "home loans" caused the crisis. While not reaching any definitive conclusions, Hess raised the additional issue of securitization,—not realizing that Glass-Steagall would have banned it—but said "the jury is still out" on whether Glass-Steagall would have prevented the crisis.

Additional coverage today includes former Clinton Labor Secretary Robert Reich raising FDR's reforms in an article run in the Korea Herald, titled "Why U.S. Can't Get Out of First Gear": Referencing FDR's reforms— namely Social Security; unemployment insurance and a national minimum wage; the WPA and CCC; along with the creation of the SEC and Glass-Steagall "to contain Wall Street"— he argues that these all helped to reduce the income of the top 1%, from 23.5% of national income in 1928, to 10.1% in 1957, with the middle class being the winners.

Perhaps most indicative, is a reader comment to a gossip article in today's London Guardian, on some unfortunate "boy genius" who is being extradited to the U.S. for prosecution for internet copyright crimes. Appearing wholly umprompted, by reader "MysticFish," is a well-thought-out presentation of Glass-Steagall: "How come Americans can pour so much energy into pursuing the little fish, and yet when it comes to the big villains who caused global financial mayhem, they do not lift a finger? How come Sandy Weill who rewarded Robert Rubin, the U.S. Treasury Secretary, with a post at Citibank, for repealing the very important Glass-Steagall Act, has not been arrested and charged? The Glass-Steagall Act was introduced by Roosevelt, as an important protective measure after the Great Depression, keeping casino banks separate from savings banks and thus enabling the savings banks to have their deposits guaranteed by the government, without the risk of being used for reckless gambling. Removing this Act enabled Citibank to gamble and push the sale of toxic derivatives worldwide, in the knowledge that they would be backed by the government."