Glass-Steagall

Glass-Steagall is the indispensible first step to global economic recovery. It will immediately hault the onset of hyperinflation, remove government committment from toxic debts, end too-big-to-fail, and force separation of commercial banking functions from investment banking functions.

Legislation to Restore Glass-Steagall, “The Return to Prudent Banking” Act, was introduced into the 112th congress as HR1489. It garnered massive institutional support and 84 co-sponsors in the house of representatives. “The Return to Prudent Banking” Act has been re-introduced in the 113th Congress as HR-129.

How It Works

Since 1999, banks have been allowed to use commercial deposits and assets as fuel for securities trading on the derivatives market.

Because commercial and speculative assets are so heavily comingled, the government is forced to protect the assets of banks making risky bets through near perpetual bailouts and purchasing of toxic debt.

It was the derivatives bubble that blew up the system and bankrupted the US banks in the 2007-2008 crash.

1. Commercial Banking institutions have one year to divest themselves of all non-commercial banking units, with no cross management or ownership between commercial and non-commercial units.

2. Commercial Banks are barred from using more than 2% of its capital for the creation, sale, or distribution of securities (certain bank-qualified securities are exempted)

3. Prevents Commercial Banks from loaning their commercial deposits into such vehicals as would support the creation and circulation of securities.

4. No securities of low or potentially low value can be placed by a bank into its insured commercial bank units.

* Adds provision stating Glass-Steagall is the preeminant regulator of the banks, limiting banks from putting its depositors and shareholders at risk.

Glass-Steagall forces separation of commercial from investment banks, it ends Too Big To Fail, bars government bailouts, and will stop the onset of hyperinflation.