Massachusetts Senate hopeful Elizabeth Warren said on Sunday that the reinstatement of a depression-era financial law known as Glass-Steagall would be among her top three financial priorities if elected as senator.
Warren, a Harvard professor who helped establish the Consumer Financial Protection Bureau, said that the 2010 Dodd-Frank Act, under which the CFPB was created, was supposed to make Wall Street more accountable.
“We fought [the fight for Dodd-Frank] out in the open, to try and get financial reforms passed,” Warren said in a call with volunteers, according to The Raw Story. “We finally got the consumer agency in place and got some reforms, and then after Dodd-Frank had passed they went back to the regulatory commissions. They were supposed to write regulations…I thought the fight was over. I thought that the good guys had won. But it turned out the lobbyists, the big financial institutions just decided to move the fight into the shadows.”
Warren said that Glass-Steagall may make Wall Street accountable and prevent a future financial collapse similar to that in 2008.
“We need a Senate and a House of Representatives that is determined to hold Wall Street accountable, not simply to achieve everything they want us to do, but to truly hold Wall Street accountable,” Warren said, The Raw Story reports. “I think the second part of that is for the regulations to come out that are still underway for the big financial institutions…If they’re not strong enough, then I think we need to take another look at Glass-Steagall, separating the commercial banking activities from the investment activities.”
Glass-Steagall was enacted following the Great Depression to prevent financial institutions from growing so large that their potential failure could cause other institutions to collapse. The rule established a wall between risky investments and deposit accounts.
The provision, however, was overturned by the passage of the Commodity Futures Modernization Act under former president Bill Clinton. The CFMA rid the derivatives industry of regulatory supervision and eliminated the separation between investment and commercial banking, effectively allowing large financial institutions to merge operations to become financial giants.
President Obama has supported the Dodd-Frank Act, which was aimed at addressing many of the problems associated with “too big to fail,” though he has never backed the restoration of Glass-Steagall. Warren said that the CFPB has helped to prevent and limit the abuses of financial institutions, an effort that is “just getting underway.”
“It’s going to make a difference,” Warren said, The Raw Story reports. “We’re going to have to have some protection for that agency. The House of Representatives already has three bills to weaken it, to politicize it, to change its funding and to get rid of it outright…We’ve got to have a bunch of House and Senate folks who are willing to fight back against that.”