News

Elizabeth Warren calls for new Glass-Steagall Act

Elizabeth Warren

U.S. Senate hopeful Elizabeth Warren called for a modernized version of the Glass-Steagall Act to protect consumers from Wall Street misbehavior, pointing to JPMorgan’s $2 billion loss as an indicator of remaining risks in the financial system.

“JPMorgan’s recent losses show that there are still serious risks in our banking system, and if we don’t act, then the next trade that goes bad could threaten our whole economy,” Warren said. “A new Glass-Steagall would separate high-risk investment banks from more traditional banking. It would allow Wall Street to take risks, but not by dipping into the life savings and retirement accounts of regular people.”

Following the economic collapse of 1929, Congress passed the Glass-Steagall Act in 1933, separating traditional, everyday banking from the risky activities of investment banks. Under Glass-Steagall, investment banks were prohibited from taking deposits while traditional banks were prohibited from underwriting securities. The legislation came under heavy fire in the 1980s, and the Gramm-Leach-Bliley Act soon repealed Glass-Steagall’s core measures.

“Wall Street’s risky bets nearly brought the economy to its knees in 2008, but instead of taking responsibility, Wall Street lobbied to water down the Dodd-Frank financial reforms of 2010 and fought to weaken the reforms Congress passed,” Warren said. “By making banks smaller, a new Glass-Steagall could also help put an end to banks that are ‘too big to fail’—further avoiding costly taxpayer bailouts.”

Before running for the U.S. Senate, Warren served as assistant to the president and special advisor to the secretary of the Treasury in 2010 and 2011. She is credited with developing the idea of the Consumer Financial Protection Bureau.

Comments are closed.