Broken Glass (Editorial)

If you spend much time on the Internet, particularly if you read politically oriented material, you may have seen invitations to join U.S. Sen. Elizabeth Warren in calling for the return of Glass-Steagall.

Warren, of course, is a Massachusetts Democrat — almost an entirely different species from your rank-and-file Arkansas Democrat — who made a name for herself as a consumer advocate. And Glass-Steagall is the Banking Act of 1933, named for two Democratic lawmakers and signed by Democratic president Franklin D. Roosevelt, which limited risk-taking by commercial banks.

Glass-Steagall was essentially replaced in 1999 by the Gramm-Leach-Bliley Act, named for three Republican lawmakers and signed into law by Democrat Bill Clinton. In less than a decade, the federal government was bailing out banks that politicians in both parties agreed were too big to fail.

So now this liberal Democrat is calling for the return of Glass-Steagall or something very like it that would re-regulate what Republicans de-regulated when they controlled both houses of Congress.

But before this starts to sound like one of those party-line Rorschach tests, take note: Sen. John McCain, R-Ariz., is also sponsoring Warren’s Glass-Steagall retread. Over the years, Newt Gingrich and Paul Ryan have expressed interest in reinstating the limits on securities activities by FDIC member banks. (And former Rep. Barney Frank, another Massachusetts Democrat, has dismissed Warren’s bill as too weak.)

Last year, Little Rock’s own Warren Stephens called the repeal of Glass-Steagall “a mistake” and advocated a dramatic reduction in the amount of deposits the biggest banks could control.

This is not a partisan litmus test or an effort to punish the banking industry. It’s a serious attempt to regain the balance that kept the banking sector crisis-free for decades. Warren’s bill may not yet be perfect, but it’s the beginning point of a journey in the right direction. n