SENATOR JOHN PATRICK CALLS ON CONGRESS TO REINSTATE GLASS-STEAGALL ACT

AUGUSTA – Last week Senator John Patrick, D-Rumford, called on Congress to reinstate the Banking Act of 1933, commonly known as the Glass–Steagall Act, which prohibited commercial banks from acting as investment banks.

“For 70 years Glass–Steagall prevented the kind of financial catastrophe we experienced in 2008,” Senator Patrick said. “Without Glass–Steagall, we lost an important economic stabilizer and any semblance of control and oversight we had over these megabanks.  Left to their own devices, these banks were able to engage in spectacularly risky behavior that eventually brought down the entire global economy.  I am all for the free market, but sometimes you need a referee.  Glass–Steagall is that referee.”

Enacted during the height of the Great Depression, Glass–Steagall was designed to ensure that banks would follow reasonable banking practices.  It forced the separation of commercial and investment banks by prohibiting commercial banks from underwriting securities and investment banks from receiving deposits.  It also granted tighter regulatory control of national banks to the Federal Reserve System.  Beginning in the 1970s, Glass–Steagall was increasingly watered down and was eventually repealed in 1999.

Senator Patrick’s efforts coincide with a national effort among state legislators to pressure Congress to reinstate Glass–Steagall.  U.S. Senator Angus King and U.S. Representatives Mike Michaud and Chellie Pingree have all expressed support for the reinstatement of Glass–Steagall.  Representatives Michaud and Pingree are cosponsors for a bill currently under consideration in the U.S. House of Representatives that would effectively restore the law.

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