Urges President and Congress to enact legislation reinstating the separation between commercial and investment banking.
Impact
This resolution reflects ongoing concerns about the stability of the financial system after mergers allowed banks to take on excessive risks without sufficient regulatory oversight. The resolution argues that the lack of a separation has led to irresponsible financial practices that significantly harmed the economy and taxpayers during the recession. By urging a reinstatement of the separation of banking functions, supporters believe it will help prevent future collapses attributed to similar financial irresponsibility.
Summary
Senate Resolution No. 42 urges the President and Congress of the United States to reinstate the separation between commercial and investment banking functions that were in place under the Glass-Steagall Act. Originally enacted in 1933, the Glass-Steagall Act established regulations prohibiting banks from engaging in both commercial and investment banking simultaneously to curb speculative financial practices that contributed to the Great Depression. The resolution highlights that the 1999 repeal of this act facilitated the merging of commercial banks with investment firms, leading to financial conglomerates that engaged in risky practices, ultimately resulting in the 2008 housing market collapse and ensuing recession.
Contention
The proposal is supported by various state legislatures, having been introduced in multiple states, signaling a call for federal legislative action to address financial regulation comprehensively. Additionally, this resolution references two specific bills currently before Congress—the Return to Prudent Banking Act and the 21st Century Glass-Steagall Act—that would create restrictions on affiliations between commercial banks and securities firms. These components of the resolution illustrate a broader debate around financial regulation and the perceived necessity for stricter controls in the banking industry.
Requesting that Congress enact legislation that would reinstate the separation of commercial and investment banking functions that were in effect under the Glass-Steagall act.
Requesting that Congress enact legislation that would reinstate the separation of commercial and investment banking functions that were in effect under the Glass-Steagall act.
Requesting that Congress enact legislation that would reinstate the separation of commercial and investment banking functions that were in effect under the Glass-Steagall act.