It’s not often you see common sense coming from “Wall Street people,” but in a rare showing of it, an ex-titan of the financial sector has spoken out in favor of logical legislation to curb rampant corruption going on in our banking sector.
John Reed, a key architect from the 90’s who was vital in making Citigroup one of the largest financial institutions in our country, has publicly said that he fully supports the reinstatement of Glass-Steagall.
Glass-Steagall was the piece of legislation which is best known for separating investment banking from commercial banking. It was repealed in 1999 by former President Clinton, in one of the biggest mistakes of his presidency.
The repeal of Glass-Steagall is widely blamed as one of the biggest catalysts for the rampant corruption we saw leading up to the financial crash of 2008, and many economists say it led to the institution of “too big to fail” mega-banks.
Mr. Reed indicates that since the repeal of Glass-Steagall, it’s forced many bankers to trend towards the side of high-risk investments hoping for bigger payouts and, of course, a much larger chance for failure.
Reed went on to say, “These cultures don’t mix well and one tends to push out the other. It does result in institutions whose behavior isn’t necessarily productive for the economy.”
Which is exactly what seems to have happened following the Glass-Steagall repeal in 1999. Big banks, behaving unethically and not for the good of their customers or the economy, but for the benefit of their profit margins.
The reinstitution of Glass-Steagall has been one of Massachusetts Senator Elizabeth Warren’s biggest objectives since becoming Senator. A movement that actually has some bipartisan support, and whose opponents seem to offer no clear reasoning behind their opposition to reinstate a piece of legislation that simply made sense.
Shouldn’t we live by the rule of, if the big financial institutions that sank our economy oppose something, it’s probably something we should be supporting?
After all, in the first decade following the repeal of Glass-Steagall we saw the worst financial crash our country had seen in almost 80 years—caused by unethical behavior on Wall Street.
The very same Wall Street characters who vehemently oppose the reinstitution Glass-Steagall.
It reminds me of a criminal opposing laws which deter them from committing their crimes. Of course they’re going to oppose this measure — it keeps them from continuing their immoral and unethical practices.
While Glass-Steagall wasn’t perfect, and some economists I’m sure will feverishly speak of its flaws, the aftermath of its repeal should be evidence enough to show that we’re a heck of a lot better off with it being in place than without.
But the question is, will Senators like Elizabeth Warren and John McCain get enough support in Congress to reinstate the legislation and bring some common sense back to our banking industry?
Well, let’s just say, I’m not going to hold my breath on “common sense” and “Congress” being involved in the same sentence any time soon.
But we can all hope — and we can certainly contact our elected officials and urge them to do the right thing.