http://www.skyvalleychronicle.com/F...-BEHAVIOR-OF-WALL-STREET-S-MEGA-BANKS-2182333(NATIONAL) -- Sens. Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.) are reintroducing legislation to revive the Glass-Steagall Act, the Depression era bill which would force big banks to split their investment and commercial banking practices.
The act was first passed in 1933 to rein in what was widely viewed as predatory and risky bank behaviors that led to the economic crash that sparked the Great Depression.
The act led to decades of banking stability and no more Great Depressions.
But back in 1999 it was repealed by the Gramm-Leach-Bliley Act "at the urging of Wall Street heavyweights like then-Citi CEO Sandy Weill," according to BusinessInsider.com .
The repeal of Glass-Steagall resulted in, many believe, the U.S. economic crash of 2007-2008 which led to the Great Recession, the worst crash since the Great Depression from which America is still recovering.
When Glass-Steagall was repealed, many big Wall Street banks started making risky bets on "derivatives" and other exotic financial constructs which arguably fueled the onslaught of the Great Recession.
Senators Warren and McCain, along with their cosponsors, Sens. Angus King (I-Maine) and Maria Cantwell (D-Wash.), said in a statement that the legislation would make big banks that are "too big to fail" smaller and safer and minimize the likelihood of a government (.e.g, taxpayer) bailout.
SEPARATION OF BANKING SERVICES
The bill, which Warren & McCain first introduced in the last Congress, would separate traditional banking services - things like checking and savings accounts - from financial institutions that offer services such as "investment banking" which are much riskier.
"Despite the progress we've made since 2008, the biggest banks continue to threaten our economy," said Warren, a long time Wall Street critic, in a statement. "The biggest banks are collectively much larger than they were before the crisis (Great Recession), and they continue to engage in dangerous practices that could once again crash our economy."
Sen. McCain says the repeal of Glass-Steagall led to a culture of dangerous greed and excessive risk-taking in the banking industry.
"Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits," McCain said in a statement.
In the last Great Recession, U.S. taxpayers bailed out the big Wall Street banks in 2008 with $700 billion of their money. Without that bailout many of the big banks may well have gone out of business.
The very next year in 2009 Wall Street was having its best year ever and was handing out billions of dollars in bonuses to executives while millions of Americans were out of work and losing their homes in the depths of the Great Recession.
Also in 2009, one out of four homeowners was "under water" with their home mortgage, meaning they owed more on their homes than they were worth and, according to the then latest ABC-Washington Post poll, one out of every three Americans had either lost their job or lived in a household with someone who had lost a job.
Former U.S. Labor Secretary Robert Reich wrote in December of 2009 that the scourge of unemployment had split America into three groups:
"(1) households in danger of losing their homes and whose kids are surviving on food stamps (that's up to one in four children in America today); (2) the vast majority of Americans who are managing but worried about keeping their jobs and homes; and (3) a small number who are taking home even more winnings than they did in the boom year 2007.
Prominent among category (3) are Wall Street bankers, many of whom are now concluding their most profitable year ever. Goldman Sachs is so flush it's preparing to give out bonuses in a few weeks totaling $17 billion. That will mean eight-figure compensation packages for lots of Goldman executives and traders.
JPMorgan Chase is rumored to have a bonus pool of around $5 billion. The three other major Wall Street banks are ratcheting up their compensation packages so their "talent" won't be poached by Goldman or JPMorgan.
Wall Street is booming again in large part because the rest of America -- categories (1) and (2), above -- bailed it out to the tune of $700 billion last year.
The Street has repaid some of that but, according to the bailout program's inspector general, much of it is gone forever.
For example, the taxpayer money that bailed out giant insurer AIG went directly through AIG to its "counterparties" like Goldman Sachs -- to whom Tim Geithner, according to the inspector general, gave away the store.
As Goldman Sachs prepares to dole out some $17 billion to its executives and traders, it's worth noting that Goldman received $13 billion a year ago from the rest of us via AIG and Geithner, no strings attached."
I'm agreeing with John on something..
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