How did these corporations work to destroy our economy? How did they bring about this terrible depression? How did they become too-big-to-fail? The answer to all these questions is that Congress passed the Gramm–Leach–Bliley Act of 1999. This act repealed the Banking Act of 1933 - the Glass-Steagall Act - that separated commercial banking from investment banking.
The Glass-Steagall Act made sure that there was a wall separating unstable securities activity from stable loan activity. With Glass-Steagall Act still in place, investment banks and hedge funds handling derivatives, swaps,and other super-gambling operations for multi-millionaires may have come crashing down. However, commercial banks that handled real estate and other consumer and business loans would not have been affected by the very risky activities of investment banks. The probability of having a depression would have been decreased greatly. Or at least, it would not have been so severe.
What's the solution? Restore the Glass-Steagall Act. Senators John McCain and Maria Cantwell have introduced Wednesday an act to do just this. Here's what Senator Cantwell said in a press release:
America can’t afford another financial crisis .... "With big banks using depositor money to gamble on Wall Street, it’s only a matter of time. Banks need to be lending to small businesses and homeowners, not fueling risky Wall Street investment schemes. We must return stability, security and confidence to commercial banking for the American public. The first step is this bill.
The administration and many in Congress are against this bill. They say that corporations have already merged their banking and investment activities making it too difficult to change. This is another way of saying that we should leave too-big-to-fail outfits alone. It's another way of saying we should wait until the too-big-to-fail conglomerates produce the next depression.
We must break up these too-big-to-fail financial monsters in order to make our economy healthy. Restoring the Glass-Steagall legislation is the best way to do the breakup. Write or call your congressperson and senators and urge them to endorse and support Republican McCain and Democratic Cantwell in this legislation.
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