Warren joins McCain to push new Glass-Steagall law for banks

U.S. Senator Elizabeth Warren and a bipartisan group of lawmakers have introduced a bill aimed at re-creating the Glass-Steagall Act, the Depression-era measure that separated commercial and investment banking.

“It will take a lot of tools to get rid of too-big-to- fail, but one of them ought to be that if you want to do high-stakes gambling, good on you, but you do not get access to people’s checking accounts and savings accounts,” Warren, a Massachusetts Democrat, told Bloomberg Television’s Peter Cook in an interview today.

The bill sponsored by Warren along with Senators John McCain, an Arizona Republican, Maria Cantwell, a Washington Democrat, and Angus King, a Maine independent, would separate traditional banks that offer checking and savings accounts insured by the Federal Deposit Insurance Corp. from “riskier financial institutions.” The latter category includes companies involved in investment banking, insurance, swaps dealing, hedge funds and private equity, according to the lawmakers’ statement released yesterday.

Warren, who announced plans for the bill at a hearing on Dodd-Frank Act implementation, told regulators testifying before the Senate Banking Committee that she didn’t expect them to back her right away.

“Based on what the regulators did to Glass-Steagall over the last 30 years, I don’t expect anyone on this panel will jump and endorse the new Glass-Steagall bill,” Warren told officials from the Treasury Department, Federal Reserve and other agencies. “Even so we’re going to keep pushing for it.”

Previous Attempts

Previous Senate attempts to revive Glass-Steagall, which was repealed in 1999, or otherwise limit the size of banks have failed to gain enough support to become law.

The Senate turned back an attempt to impose limits on the size of banks during debate over legislation that became the 2010 Dodd-Frank Act. An amendment sponsored by two Democrats, Sherrod Brown of Ohio and Ted Kaufman of Delaware, was defeated 61-33.

McCain, a former Republican presidential candidate, said he’s reintroducing a measure to restore the firewall because it’s needed to protect taxpayers and restore confidence in the financial system.

“Since core provisions of the Glass-Steagall Act were repealed in 1999, shattering the wall dividing commercial banks and investment banks, a culture of dangerous greed and excessive risk-taking has taken root in the banking world,” McCain said in the statement. McCain in 1999 voted for the Gramm-Leach- Bliley Act, which overturned Glass-Steagall.

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