About midway through the Republican platform, there appears this statement: “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investments.” It’s a head-scratcher, because reimposing Glass-Steagall would be an about-face for Republicans. The law, which forced financial institutions to separate commercial and investment operations, was a Democratic, Depression-era creation. The long effort to weaken it started with Republicans. By the time the law was repealed in 1999, revisions had made it toothless; Republicans controlled Congress; and most Democrats, led by the Clinton administration, had embraced their opponents’ anti-regulatory thinking. The platform language is odd in other ways. Some politicians, notably Bernie Sanders, have called for what amounts to a new Glass-Steagall, embodied in a break-up-the-banks bill sponsored in the Senate by Elizabeth Warren and John McCain. Their rationale for the bill is that behemoth banks helped cause the financial crisis, that they still pose a threat, and that breaking them up is the best defense. By contrast, the Republican platform asserts that the crisis was caused not by the banks, but by government housing policies. But if the banks did not cause the crisis, why break them up? The platform doesn’t say. Nor does it say whether the party wants to reinstate the enfeebled version of Glass-Stegall that existed shortly before repeal, or whether it wants a vigorous new law — which seems unlikely given that Republicans have never favored major pro-regulatory bank reform. Calling to reinstate Glass-Steagall gives Republicans a retort, however slippery, to criticism that they have no plan to regulate Wall Street — criticism validated by other parts of the platform that are devoted to tearing down the Dodd-Frank financial reform law of 2010. In effect, the platform pairs the party’s crusade to end Dodd-Frank with a call to reimpose Glass-Steagall. But that would not add up to financial regulation. Even if Republicans were serious about breaking up the banks, Dodd-Frank reforms would still be needed, including the Consumer Financial Protection Bureau and regulation of derivatives.
Blogs I Follow
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