States Pass Pro-Glass-Steagall Resolutions

From Think Progress:

These resolutions are non-binding and symbolic. Only the federal government has the ability to reinstate the wall between commercial and investment banking. The idea behind the resolutions, however, is to help Sen. Elizabeth Warren (D-MA) put pressure on the rest of Washington by demonstrating state-level anger over the lack of accountability for the financial collapse. Warren, along with a bipartisan group of Senate allies, is currently pushing a “21st century Glass-Steagall” bill aimed at limiting the ability of commercial banks to engage in risky speculation.

So far, Glass-Steagall resolutions have only passed in Maine and South Dakota, the pairing of one very progressive and one very conservative state reflecting the odd political alliance Cirilli finds to be responsible for the rise of Glass-Steagall resolutions. Relatively progressive Democrats furious about inequality and predatory banking have joined up with libertarians angry about government bailouts to push for a new commercial/investment division.

Whether reimposing Glass-Steagall restrictions could head off another financial crisis is a complicated question. Arguably, the repeal of Glass-Steagall opened the door to a much broader range of financial speculation with a greater amount of assets, creating the sort of concentrated and interlinked risk that led to the domino collapse of banking institutions in 2008. Skeptics, however, note that the most significant 2008 collapses were either not commercial banks or commercial banks that collapsed for reasons other than their own investment banking department’s bets.

It’s also possible Glass-Steagall’s effects were less direct. Economist Joseph Stiglitz believes that the 1999 repeal changed the corporate culture of commercial banks, causing them to think and operate more like investment banks. This new culture led to riskier loan practices of the sort that really did bring down the big banks.