Obama's Finance Secretary-Designate, Jacob Lew, Rejects "Anachronistic" Glass-Steagall in Confirmation Hearing
February 14, 2013 • 12:48AM

Confirmation hearings in the Senate Finance Committee were held today for Former OMB chief and Chief of Staff to Obama Jacob Lew. Lew took the opportunity to reject Glass- Steagall restoration as an "anachronistic," "out-dated" form of regulation which had failed to "keep pace with the growing complexity of the financial system," while asserting that Dodd-Frank has solved that problem!

Sen. Maria Cantwell (D-WA), who had co-sponsored a Glass- Steagall bill in an earlier session of Congress but has stalled for the past three years on re-introducing it, asked Lew point-blank: Do you support the re-implementation of Glass-Steagall?

LEW: Senator, as we discussed when we had this conversation, you know, Glass-Steagall had been, over the years become something of an anachronism, and much of the activity in the— in the financial world have gotten beyond it. And I think the problems we had in the— leading up to the financial crisis were evidence that our financial regulatory system did not keep pace [with the growing complexity of the financial system].

Now, I think Dodd-Frank was a critically important step to reasserting proper regulatory oversight of an industry that's critical to the health of our economy. I think as we go forward, we have to ask questions. As we complete the implementation of Dodd-Frank, are there more actions that are needed? And they have to be actions that make sense in 2013. So, I think going back, while I'm a student of history and— and New Deal history in particular is of great history [sic] to me, I don't think it's just resuscitating a 1930s statute. It's a question of what do we need to do to manage the financial challenges now.

Sen Cantwell responded that "I'll take that as a no. And to that point, I mean, I — I don't see how you contain this issue as we now see the CFTC and the treatment of swaps and futures as different clearing measures. Aren't you worried that that's going to provide more systemic risk as well?"

Lew stammered on: "You know, I— I— I think that if you— if you look at the issues, things like margin requirements for swaps, it's very important that we get on top of regulating things that create systemic risk. And I— I didn't mean to be answering the prior question yes or no. I think it's just a little bit more complicated. I think that the question of, is there a need for any further consideration of— of financial regulation is one that just comes in sequence after implementing Dodd-Frank. And I come to the issue open-minded, knowing that we can't let what happened leading up to 2008 happen again. WE CAN'T LET A REGULATORY SYSTEM BECOME OUTSTRIPPED BY THE COMPLEXITY AND ORGANIZATION OF A FINANCIAL SYSTEM WHICH OUR ECONOMIC LIFE DEPENDS ON." [Empahsis added.]

No other members of the Committee brought up Glass-Steagall.