Paul Ryan: ‘I Agree’ We Need To Reinstate Glass-Steagall

Republicans have vociferously fought new banking regulations in the name of job creation, with many lawmakers and presidential candidates even calling for undoing existing ones, such as the Dodd-Frank Wall Street reform law, which was passed in order to guard the financial system against a repeat of the 2008 financial crisis.

So it was surprising to hear Rep. Paul Ryan (R-WI), the powerful chairman of the House Budget Committee, say he’d be interested in reinstating the Glass-Steagall Act, a Depression-era law that curbed speculation by separating deposit and investment banks. The law was repealed in 1999, but on conservative host Bill Bennett’s radio show last week, Ryan said he “agree[d]” with a caller who wanted to reinstate the law:

CALLER: Hasn’t there been a separation with the removal of Glass-Steagall and the uptick rule to let Wall Street go wild? When is someone going to put that back in place? We need to put that back in place to help stabilize things.

RYAN: Yeah, I agree with that. […] Mixing banking and commerce, meaning allowing banks to go do non-banking activities, by leveraging their deposits. […] The way I look at this, there’s a lot of merit to what you just said. […] If banks want to make hedge fund-like returns, then they should go be a hedge fund. But if you want to be a bank, then be a bank. Don’t try to be a hedge fund and take undue risks with your depositors money. So the way I see it, we need to have more conservative leverage limits, so you can’t leverage too much, and keep these firms within the silos where they are supposed to operate based on the degree of risk that they’re supposed to take. And if you’re just taking deposits, then I think we need to reestablish those kind of limits.

Listen here:

The repeal of Glass-Steagall led to the creation of mega-banks like Citigroup and JP Morgan Chase that combine traditional lending with risky investment banking. Many economists believe the repeal played a key role in the financial crisis of 2008. “As a result [of the repeal], the culture of investment banks was conveyed to commercial banks and everyone got involved in the high-risk gambling mentality. That mentality was core to the problem that we’re facing now,” said Nobel Prize winning economist Joseph Stiglitz.


Indeed, two of the repeal’s chief proponents, former President Clinton and former Speaker Newt Gingrich (R), have recanted. “In retrospect, repealing the Glass-Steagall Act was probably a mistake,” Gingrich said yesterday. “I made some mistakes, too,” Clinton wrote in his new book, including, “signing the bill repealing the Glass-Steagall Act.”

The reinstatement of Glass-Steagall would go much farther than Dodd-Frank does in breaking up the big banks, yet Ryan has been a vocal opponent of the milder law, and the GOP budget he authored would have repealed some of its provisions. Still, it’s welcome to see Paul embrace support for Glass-Steagall. Perhaps he could use his considerable influence in the GOP caucus to advance a bill reinstating it.