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‘War’ on Wall Street? Bankers slam regulations that were in place 10 years ago

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From 1933 to 1999, the Glass-Steagall Act separated commercial banking from investment banking, preventing deposit-taking banks from using consumers’ money for risky stock market investments.

For two decades prior to Glass-Steagall’s repeal, the financial sector experienced robust, record-breaking growth.

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And less than a decade after the law was repealed, the US’s financial system experienced near-total collapse, forcing the government to bail the big banks out with hundreds of billions in taxpayers’ money.

Yet, despite these basic facts, bankers are saying that a return to the Glass-Steagall Act — which would see some of the US’s largest banks get broken up — would have a “severe effect” on the banking system, and are warning that it would mean banks would lend less to businesses and consumers, further hurting the economy.

“The impact on Wall Street would be severe,” Wayne Abernathy, a vice president at the American Bankers Association, told Bloomberg news service.

The issue of returning to the Glass-Steagall Act — which was enacted in the 1930s as a way of preventing another stock market crash like the one that happened in 1929 — has become a hot topic in Washington ever since Sen. John McCain (R-AZ) and Sen. Maria Cantwell (D-WA) put forward a bipartisan bill to bring back some of the provisions in the original Glass-Steagall Act.

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Bringing back the wall between investment and commercial banking means that some of the highest-profile banks in America — including Goldman Sachs and Citigroup — would have to be broken up. And while that idea sends shudders down the spines of Wall Street traders, it has plenty of appeal on Main Street, where anger with the bank bailout has been simmering for more than a year.

DEVASTATION ON WALL STREET — OR NO CHANGE?

Yet not all opponents of Glass-Steagall believe it would have a “severe” impact on Wall Street — some are saying it would change nothing at all.

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“If you look at what happened, with or without Glass-Steagall, it would have made no difference,” Bloomberg quoted H. Rodgin Cohen, a corporate lawyer involved in many cases stemming from last year’s financial collapse. Bloomberg reported:

Cohen and others say the law wouldn’t have saved Bear Stearns or Lehman Brothers Holdings Inc., both of which were pure investment banks, from collapse. And the government would not have been able to enlist JPMorgan Chase & Co. to take on the assets of Bear Stearns or allow Goldman Sachs Group Inc. and Morgan Stanley to become bank holding companies, giving them access to the Federal Reserve’s discount window.

Rather than split up banks, regulators should provide better supervision and require tougher capital requirements, said Cohen, who was also involved on behalf of banking clients in shaping the bill that dismantled parts of Glass-Steagall.

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Other defenders of the status quo have made far less substantial arguments.

“I think going back to Glass-Steagall would be like going back to the Walkman,” said an unnamed Treasury official.

Political observers say that the McCain-Cantwell bill has only a slim chance of becoming law. When the bill was tabled earlier this month, Sen. Chris Dodd (D-CT), chairman of the Senate Banking Committee, said it would be “pretty difficult” to garner the support needed in the House and Senate to pass the legislation. The current financial reform measures working their way through Congress do not include anything quite as landscape-shifting as a return to Glass-Steagall.

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For some economic analysts, the push to bring back Glass-Steagall amounts to war.

“Congress is at war with Wall Street,” Lyle Gramley, a former board member of the Federal Reserve, told Bloomberg. “They perceive Wall Street as being the root source of our financial crisis, and they want to do something to make sure that doesn’t happen again.”

Yet for other observers, it isn’t war enough.

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“The repeal of Glass-Steagall has exposed the U.S. economy to a level of risk that is simply unacceptable,” House Rep. Maurice Hinchey (D-NY), who introduced a bill similar to McCain-Cantwell in the House, wrote in a recent column.

Today, just four huge financial institutions hold half the mortgages in America, issue nearly two-thirds of credit cards, and control about 40 percent of all bank deposits in the U.S. In addition, the face value of over-the-counter derivatives at commercial banks has grown to $290 trillion, 95 percent of which are held at just five financial institutions. We cannot allow the security of the American economy to rest in the hands of so few institutions.

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… then let us make a small request. Like you, we here at Raw Story believe in the power of progressive journalism — and we’re investing in investigative reporting as other publications give it the ax. Raw Story readers power David Cay Johnston’s DCReport, which we've expanded to keep watch in Washington. We’ve exposed billionaire tax evasion and uncovered White House efforts to poison our water. We’ve revealed financial scams that prey on veterans, and efforts to harm workers exploited by abusive bosses. We’ve launched a weekly podcast, “We’ve Got Issues,” focused on issues, not tweets. Unlike other news sites, we’ve decided to make our original content free. But we need your support to do what we do.

Raw Story is independent. You won’t find mainstream media bias here. We’re not part of a conglomerate, or a project of venture capital bros. From unflinching coverage of racism, to revealing efforts to erode our rights, Raw Story will continue to expose hypocrisy and harm. Unhinged from corporate overlords, we fight to ensure no one is forgotten.

We need your support to keep producing quality journalism and deepen our investigative reporting. Every reader contribution, whatever the amount, makes a tremendous difference. Invest with us in the future. Make a one-time contribution to Raw Story Investigates, or click here to become a subscriber. Thank you.



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LAX customs officer calls journalist ‘fake news’ and demands to know if he works for CNN or MSNBC: report

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On Thursday, Empire Magazine's James Dyer stated in a Twitter thread that he was stopped by a customs official while arriving at Los Angeles International Airport, aggressively interrogated about his journalistic career, and accused of being "fake news":

Wow. Just... wow. Just went through LAX immigration. Presented my journalist visa and was stopped by the CBP agent and accused of being part of the ‘fake news media’.

— James Dyer (@jamescdyer) August 22, 2019

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‘He does not belong in this office’: Ron Reagan says Trump ‘has been crazy because he is crazy’

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The son of Republican President Ronald Reagan blasted President Donald Trump on MSNBC on Tuesday.

Ron Reagan, Jr. was interviewed on "Hardball" by Chris Matthews.

The host recounted Trump's attacks on Denmark after they said Greenland was not for sale.

"He wants to fight with everybody, including the quiet, American-loving Danes. What’s up?" Matthews asked.

"Well, it’s craziness, but I take a little umbrage at this idea that we have to ascribe it to something like the economy or his anxiousness about re-election. He’s acting the way he’s acting because he is who he is and what he is," Reagan replied.

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Trump may look unstable now — but the economy is going to make him much worse: CNN’s April Ryan

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On Thursday's edition of CNN's "OutFront," analyst and American Urban Radio Network Washington bureau chief April Ryan walked through how President Donald Trump backed himself into a corner by trying to build his brand on a great economy — and is coming to pieces as a result.

"April, what are you hearing? Is the economy causing the president's erratic behavior?" asked anchor Kate Bolduan.

"Yes, yes, and yes," said Ryan. "This president has been touting a great economy, and this is the cornerstone since I guess since the very beginning of his administration for people to feel that he should win re-election, that he is firmly planted for the American public and he's working for them," said Ryan. "But indicators, non-traditional indicators, are saying something different. He is having a hard time trying to marry the great economy with what it looks like for the American public, particularly the grassroots."

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