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Keating says Glass-Steagall would not have prevented financial crisis

Frank Keating

Frank Keating, the president and CEO of the American Bankers Association, recently said that he was “dismayed” by suggestions that America’s largest banks should be broken up to end too-big-to-fail.

“The banking industry strongly believes that no bank—or company—should be too big to fail,” Keating said, CNBC News reports. “Moreover, these types of misguided [breakup] proposals aren’t the solution and would damage our still-recovering economy.”

Keating said that the nation’s largest banks support and serve some of America’s largest corporations, adding that if the institutions were broken up, it would force U.S. companies into the arms of foreign financial institutions.

“Financing would gravitate more heavily to the lightly regulated ‘shadow’ banking system, and our country’s status as the world’s premier financial center would be in grave peril,” Keating said, according to CNBC News.

Additionally, Keating said it is time to reconsider proposals that would be damaging to the American economy.

“Neither our financial system nor local communities are well-served by a rush to judgment on this issue,” Keating said, CNBC News reports. “Those calling for a return to Glass-Steagall to solve the world’s economic problems simply aren’t looking at the facts.”

The Glass-Steagall Act refers to the Banking Act of 1933, which established the Federal Deposit Insurance Corp. and separated commercial and investment banking. Keating said that Glass-Steagall would not have prevented the latest financial collapse, as the Government Accountability Office maintains that the crisis was caused by securities that fueled subprime mortgages.

“Policy decisions should be based on reason and facts, not hysteria and catchy sound bites,” Keating said, according to CNBC News.

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