A decade following the most devastating economic collapse since the Great Depression, Sen. Elizabeth Warren is worried that another crash will happen soon if Congress does not enact banking reforms.
The Massachusetts Democrat has frequently called for legislation to break up the nation's biggest banks. When The New York Times recently asked whether she still held that view, she responded: “Oh, yeah. Give me a chance. We have got to change the rules.”
Warren told her Twitter followers that “if we want to avoid another financial crisis, we need to start holding Wall Street executives accountable.” The lawmaker wrote that she introduced the Ending Too Big to Jail Act last week “to force law-breaking bankers to trade in their pinstripe suits for orange jumpsuits.”
Referring to bank-friendly actions by the Republican-controlled Congress in recent years, Warren declared: “Rolling back regulations on the biggest financial institutions, rolling back regulations on Wall Street, this is absolutely the wrong direction for us to go.”
She warned in the Times interview that the country is “not even close” to being ready to respond to another economic collapse. It is essential to adopt stricter rules concerning bank speculation, according to Warren.
Other progressive politicians, including independent Vermont Sen. Bernie Sanders, also are urging Congress to rein in institutions such as JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs. The five banks have made more than $583 billion since the crisis that began in 1998, while most low-income Americans have not yet recovered, according to Public Citizen.
Trillions of dollars in tax cuts, advocated by President Trump and passed by lawmakers, have further enriched Wall Street. At the same time, the government has cut back on its efforts to stop risky banking activities that could leave customers vulnerable to financial ruin.
“In an effort to inflate profits for big banks, the Trump administration and Congress are setting us up for another crash,” Morris Pearl, a former BlackRock Investments officer, wrote in an op-ed for USA Today. “Without adequate regulation, there's no world in which bankers voluntarily refrain from taking reckless bets again and again, until we're right back where we were 10 years ago.”
Warren has been making that argument for years. In 2017, she joined the late John McCain and two other senators in sponsoring the 21st Century Glass-Steagall Act. The measure would have restored the Glass-Steagall Banking Act of 1933, which Congress repealed in 1999.
Warren's bill was doomed to fail because of the Republican majorities on Capitol Hill, even though some GOP leaders supported it. A statement from the senator's office pointed out that Trump, Treasury Secretary Steve Mnuchin, National Economic Council Director Gary Cohn and the 2016 Republican Party platform had endorsed reinstating Glass-Steagall.
The statement explained that the legislation “would separate traditional banks that have savings and checking accounts, and are insured by the Federal Deposit Insurance Corporation, from riskier financial institutions that offer services such as investment banking, insurance, swaps dealing, and hedge fund and private equity activities.”
The bill would have clarified “regulatory interpretations of banking law provisions that undermined the protections under the original Glass-Steagall; and would make 'Too Big to Fail' institutions smaller and safer, minimizing the likelihood of a government bailout,” Warren's staff wrote.
The senator said that “despite the progress since 2008, the biggest banks continue to threaten our economy,” adding: “For 50 years, the original Glass-Steagall Act helped produce broad-based economic growth and avoid any major financial crisis. The 21st Century Glass-Steagall Act will re-establish the wall between commercial and investment banking, and make our financial system more stable and secure.”
McCain lamented that “since core provisions of the Glass-Steagall Act were repealed … a culture of excessive risk-taking has taken root in the banking world, placing the financial security of millions of hardworking American taxpayers at risk.”
He warned that “even with the thousands of pages of misguided and burdensome regulations imposed by Dodd-Frank in the wake of the 2008 financial crisis, there are indications that this culture of risky behavior continues today.” The senator stressed that “it is critical for Congress to reinstate the protections that separated main street banks and investment banks.”
Common Dreams reported that in March, the Senate passed a bank-deregulation bill which opponents feared would lead to another financial crisis. Sixteen Democrats and independent Sen. Angus King of Maine united with Republicans in approving the dubiously named Economic Growth, Regulatory Relief and Consumer Protection Act.
Critics mocked the bill as the “Bank Lobbyist Act.” The anti-corruption Rootstrikers organization described the vote as “a shameful moment for the Senate.” The group's campaign director, Kurt Walters, wrote that “the Senate Democrats who joined the GOP to deliver this bank giveaway were as politically short-sighted as they were reckless in putting our economy at risk.”