CONGRESS is making another commendable attempt to rebuild the barrier between commercial banks and investment banking.
U.S. Sen. Maria Cantwell, D-Wash., is part of the effort to pass a Glass-Steagall Act for the 21st century.
The legislation separates traditional commercial-banking services from investment banking and the risky activities that triggered a government bailout.
Americans paid the price on Main Street and covered the bets of financial institutions that invented new ways to lose money on Wall Street.
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The Banking Act of 1933, the original Glass-Steagall Act, protected the country for more than 60 years until its repeal in 1999. Even the Great Recession did not generate much support for reinstatement of laws that worked.
Democrat Cantwell and Sen. John McCain, R-Ariz., tried in 2009. Now they are back with Sen. Elizabeth Warren, D-Mass., and Sen. Angus King, I-Maine.
Their mission is basic. Separate the core services of commercial banks from the high rollers, with their swaps, hedge funds and derivatives. Get the gamblers out of the Federal Deposit Insurance Corporation.
The legislation, introduced earlier this month, would not only divide banking functions, but also prohibit the bureaucratic language that eroded Glass-Steagall.
Cantwell’s bill defines the functions considered the “business of banking” in order to preclude artful evasions of the law. Regulators had allowed the qualifier “closely related” to banking to allow banks to get into ever riskier territory.
The law has a five-year transition period, and also comes with the promise of taking the edge off the expensive notion of “too big to fail.” Traditional banks are less of a potential hazard to the economy and taxpayers.
Capitol Hill has shown scant interest in reviving Glass-Steagall prohibitions, but wisps of belated progress hold out hope.
The consumer-protection agency created under the Dodd-Frank financial reforms finally got a director, two years after his nomination.
Dodd-Frank, the Volcker Rule and other remedial efforts do not speak with the clarity of a new Glass-Steagall Act or express the bipartisan frustration echoed by its sponsors.