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Wall Street Journal Editorial: Bring Back Glass-Steagall

A proposal by Sen. John McCain (R-Ariz.) to restore the Glass-Steagall Act which banned large banks from affiliating with securities firms and engaging in the...
January 20, 2010

A proposal by Sen. John McCain (R-Ariz.) to restore the Glass-Steagall Act which banned large banks from affiliating with securities firms and engaging in the insurance business has drawn an editorial endorsement from the Wall Street Journal.

The Banking Integrity Act of 2009 (S. 2886) would reinstate the firewall between consumer banking and investment banking, while also getting banks completely out of insurance. This was the situation for more than 60 years, until the repeal of the Glass-Steagall Act in 1999 - the same year that the Gramm-Leach-Bliley Act was passed, allowing banks that take deposits from consumers to engage in risky investment practices and also enter the insurance business.

"The business-culture delusions of the '90s may seem obvious today," wrote Thomas Frank of the Wall Street Journal editorial staff. "But at the time, our great thinkers assured us that we had turned a historical corner and the "old rules" no longer applied. Prosperity was eternal. And government was a dinosaur, serving only to impede our pursuit of info-age excellence. Again and again, the narrow agenda of particular interests were cast as freedom for all of humanity."

The editorial advocates "drawing a line between banks that the government effectively guarantees and banks that behave like big hedge funds, experimenting with the latest financial toxins. Hopefully, that day will come before Wall Street decides to take another headlong run at some attractive cliff."

Bring Back Glass-Steagall (Wall Street Journal 1/12/10)

Statement by Sen. John McCain on the Banking Integrity Act (12/17/09)