As we prepare for the gloves-coming-off presidential campaigning and the endless advertisements and automated phone calls, it is good to keep tabs on what candidates say during the early presidential debates.
Although a lot of candidates have a tendency to say what they think voters want to hear, what they say during debates is a good way to gauge a candidate’s understanding and attitude toward an issue (and what they believe is the public’s understanding and attitude toward an issue). At the first Democratic presidential debate, held Oct. 13 in Las Vegas, several of the presidential hopefuls expressed their views on the Glass-Steagall Act; in fact, it was mentioned eight times during the debate.
The Glass-Steagall Act was passed by Congress and signed into law by President Franklin D. Roosevelt in 1933. It was a response to the Great Depression that separated commercial banking from investment banking.
Arguments that the risks associated with joining both commercial and investment banking were overstated finally gained enough traction to have the law repealed in 1999, during President Bill Clinton’s term. Big banks argued that they were put at a disadvantage compared with banks in Europe that were free to offer both commercial and investment banking services. Thus, in 1999, Congress passed the Gramm-Leach-Bliley Act, which overturned the original prohibition.
Lawmakers such as Sens. Elizabeth Warren (D-Mass.), John McCain (R-Ariz.), Maria Cantwell (D-Wash.) and Angus King (I-Maine) – who re-introduced the 21st Century Glass-Steagall Act – often credit the act’s repeal as a factor leading to the financial crisis in 2008.
Former Maryland Gov. Martin O’Malley was the first to mention the act in the debate, stating that he believed it should be reinstated.
“[W]e need to separate the casino, speculative, mega-bank gambling that we have to insure with our money, from the commercial banking – namely, reinstating Glass-Steagall,” O’Malley said. “Secretary (Hillary) Clinton mentioned my support eight years ago. And Secretary, I was proud to support you eight years ago, but something happened in between, and that is a Wall Street crash that wiped out millions of jobs and millions of savings for families. And we are still just as vulnerable Paul Volcker says today. We need to reinstate Glass-Steagall and that’s a huge difference on this stage among us as candidates.”
The difference O’Malley raised was the question of whether to break up the “big banks” and how to prevent another “too-big-to-fail” bailout.
The debate moderator, CNN Anchor Anderson Cooper, then turned to Clinton: “Secretary Clinton, he raises a fundamental difference on this stage. Sen. [Bernie] Sanders wants to break up the big Wall Street banks. You don’t. You say charge the banks more, continue to monitor them. Why is your plan better?”
To which, Clinton responded: “Well, my plan is more comprehensive. And frankly, it’s tougher because of course we have to deal with the problem that the banks are still too big to fail. We can never let the American taxpayer and middle class families ever have to bail out the kind of speculative behavior that we saw. But we also have to worry about some of the other players – AIG, a big insurance company; Lehman Brothers, an investment bank. There’s this whole area called shadow banking. That’s where the experts tell me the next potential problem could come from. So I’m with both Sen. Sanders [(I-Vt.)] and Gov. O’Malley in putting a lot of attention onto the banks. And the plan that I have put forward would actually empower regulators to break up big banks if we thought they posed a risk. But I want to make sure we’re going to cover everybody, not what caused the problem last time, but what could cause it next time.”
Sanders has been very outspoken about his thoughts on Wall Street and breaking up the big banks. He disagreed that Clinton’s plan was tougher than his.
“Let us be clear that the greed and recklessness and illegal behavior of Wall Street, where fraud is a business model, helped to destroy this economy and the lives of millions of people,” Sanders said, pausing for applause. “Check the record. In the 1990s – and all due respect – in the 1990s, when I had the Republican leadership and Wall Street spending billions of dollars in lobbying, when the Clinton administration, when Alan Greenspan said, ‘What a great idea it would be to allow these huge banks to merge,’ Bernie Sanders fought them, and helped lead the opposition to deregulation. Today, it is my view that when you have the three largest banks in America – are much bigger than they were when we bailed them out for being too big to fail, we have got to break them up.”
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