Today, Sens. Maria Cantwell (D-WA) and John McCain (R-AZ) introduced legislation to reinstate the firewall between commercial and investment banks. “We need to rebuild the wall of Glass-Steagall so banks will stop diverting resources to Wall Street speculation and get back to more business lending to main street,” Cantwell said.
The legislation puts McCain in an awkward position, given that the firewall that had existed until the late 90s was torn down by his good friend, former Sen. Phil Gramm (R-TX). It was the Gramm-Leach-Bliley Act that allowed financial institutions to abolish all of the significant rules put in place at the time of the Great Depression designed to prevent a repeat.
Gramm was of course McCain’s close economic adviser during the 2008 presidential campaign. McCain said last year that, if elected president, he would “rely on the circle” of friends he had developed over many years, “people like…Phil Gramm.” Gramm was later sidelined as a formal McCain adviser after he said Americans were suffering a “mental recession” and had turned into a “nation of whiners.”
Today, a reporter asked McCain if he had spoken to Gramm about his new legislation:
QUESTION: Senator McCain, your friend and former colleague, Senator Gramm, was the one who spearheaded Gramm-Leach-Bliley — the 1999 law that brought down a lot of these walls.
QUESTION: Have you talked to him about – one of his big accomplishments, maybe the after-effects it has had?
MCCAIN: I’ve talked to Senator Gramm, my old friend Senator Phil Gramm many, many times on many issues. … I’m sure that Senator Gramm probably does not agree with this legislation. It doesn’t change our relationship. We just don’t agree.
Huffington Post reports that reinstituting Glass-Steagall “hasn’t gotten any attention from the Obama administration, which does not attribute the current crisis to the law’s repeal, and dismisses the idea that reinstating it would have any impact on the financial sector.” Obama’s head of the National Economic Council, Lawrence Summers, strongly supported the repeal in 1999. Fed chief Ben Bernanke opposes the Cantwell-McCain legislation.