One of the major issues that I will take into consideration when choosing a candidate to support in the 2016 election is where they stand on re-instituting Glass-Steagall. It is not the only factor that I will consider, but it is certainly one of the more important. The Great Recession, which began at the end of 2007 and cost US taxpayers and the US economy multiple trillions of dollars, was allowed to happen because Glass-Steagall was completely repealed in 1999, just 8 years prior. I am also convinced that another financial debacle will occur in the near future if Glass-Steagall is not re-instituted. Glass-Steagall was a simple act that separated the entities that preform risky business functions normally associated with investment banking, from the relatively safer business functions normally associated with commercial banking. Historically, commercial banks have been safer than investment banks, and therefore, have been allowed to offer deposit accounts insured by the FDIC. I have written previously about this topic in more depth. Please reference In Support of Glass-Steagall and Strengthen Our Financial System with Effective Regulations.
So where do the current presidential candidates fall on the topic of Glass-Steagall? I should probably point out here that I am neither a republican nor a democrat, I am truly an independent. I think it is safe to say that none of the republican candidates support re-instituting Glass-Steagall. It has not been posed as a topic at any of the republican debates, and I have not heard a question regarding Glass-Steagall asked to any of the republican candidates in interviews. However, there is at least one republican who is on the correct side of this issue. John McCain is currently co-sponsoring a senate bill with Elizabeth Warren to reinstate Glass-Steagall. However, he is not a candidate this year. Generally, republicans do not favor re-instituting Glass-Steagall. I believe they view it simply as additional regulation, which it is not. It would actually reduce regulatory requirements, as well as make our financial system safer. However, there are not many people who adequately understand the implications and need for Glass-Steagall.
So how are the democratic candidates doing on the topic of Glass-Steagall? Let’s take the results from the recent democratic debate. At least the topic was discussed there. The leader in the polls at present, Hillary Clinton, is clearly against re-instituting Glass-Steagall. She says she has a better plan. That indicates to me that she too does not truly understand the issues behind the need for Glass-Steagall. There are no better plans. Other plans have already been tried, and have failed. Bernie Sanders says he is for re-instituting Glass-Steagall, but then says we must “break up the big banks”. Sorry Bernie, but that statement is off point. It is not about how big the banks are, or breaking them up, it is about what business functions they are allowed to perform. O’Malley seemed to understand the issues, and support re-instituting Glass-Steagall. However, his poll numbers at the moment are low.
Will our next president support re-instituting Glass-Steagall? It seems like a long shot at this point, and that means that there is a likelihood that in coming years we will be trying to assess how we got into yet another financial disaster.