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Don’t Be Fooled By The Republicans’ Call To Reinstate Glass-Steagall

Republican presidential candidate Donald Trump speaks at the Republican National Convention on Monday CREDIT: AP PHOTO/MARK J. TERRILL
Republican presidential candidate Donald Trump speaks at the Republican National Convention on Monday CREDIT: AP PHOTO/MARK J. TERRILL

Republicans made some news with the release of their party platform on Monday: the new document contains a call to reinstate a Depression-era law that cracked down on banks, whose repeal has often been blamed for Wall Street’s growth and recklessness in the lead up to the recession. But that line is still overshadowed by many other calls in the document — and from the party’s candidate himself — to undo financial regulations aimed at keeping bank behavior in line.

The sentence that garnered attention reads, “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.” Glass-Steagall enforced a separation of regular commerical banking and riskier investment and insurance activities. But it was repealed in the 1990s, after which banks started to merge those activities once again, becoming larger and melding vanilla activities with risk-taking.

The Republican Party’s warming to the reinstatement of Glass-Steagall is notable because it mirrors calls on the other side of the aisle. For the first time ever, the Democratic Party platform has also called for bringing back “an updated and modernized version” of the law. Democratic presidential candidate Bernie Sanders had demanded the same thing on the trail, a call that has also been made by Sen. Elizabeth Warren (D-MA).

But it is the only place of commonality between the two parties when it comes to Wall Street regulation, a place that some progressives feel has lost its importance. The rest of the Republican Party’s document goes to great lengths to disparage other existing bank regulations.

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The biggest regulatory response to the financial crash of 2008 has been the enactment of the Dodd-Frank financial reform package, which the Republican Party platform calls “unprecedented government control over the nation’s financial markets,” claiming, “The consequences have been bad for everyone except federal regulators.” It says that Dodd-Frank has killed jobs, increased risks, and “shackled” economic growth. “We support removing roadblocks and regulations that prevent access to capital,” it states. http://thinkprogress.org/politics/2016/07/12/3797322/gop-platform-draft/The document dedicates an entire section to disparaging Dodd-Frank. And it specifically calls for either abolishing or restricting the Consumer Financial Protection Bureau (CFPB), the agency tasked with regulating predatory products used by everyday consumers, and changing the way Too Big To Fail banks are dealt with in a crisis.

In fact, the mention of reinstating Glass-Steagall comes buried in a different section titled “Regulation: The Quiet Tyranny,” just after a sentence stating, “The Dodd-Frank law, the Democrats’ legislative Godzilla, is crushing small and community banks and other lenders.”

This all comports with what’s been said by the party’s leader, presidential candidate Donald Trump. While he was lauded for the populism of saying that he would go after “hedge fund guys” in his tax plan and has attacked rival Hillary Clinton for being “totally controlled by Wall Street,” his actions have spoken differently. His tax plan ended up being skewed almost entirely to the rich. Meanwhile, he has promised to undo Dodd-Frank, saying his plan will be “close to a dismantling.”

While much of Dodd-Frank’s regulations are still in the process of being written and implemented, it’s notched some important changes. Too Big To Fail is being addressed through new rules on how much money banks have to keep to cushion the impact of crises and the designation of particularly large firms as “systemically important” that are under even stricter requirements. Risky trades, called derivatives, have started to be moved to transparent exchanges. Banks will soon be barred from using consumer deposits to make bets to increase their own profits. And the CFPB, so reviled by the Republican Party, has already secured over $10 billion in relief from unfair bank practices for 17 million people, while it’s written new rules for mortgage lending, credit reports, and debt collectors.