After 14 Years of Free-for-All, Glass-Steagall Is Back

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Three cheers for Elizabeth Warren!

Yesterday she launched a wire-guided Scud missile at the too-big-to-fail banks.

The freshman senator from Massachusetts, formerly a Harvard Law School professor specializing in bankruptcy law, introduced her "21st Century Glass-Steagall Act" co-sponsored with Sens. John McCain (R-Ariz.), Maria Cantwell (D-Wash.), and Angus King (I-Maine).

And it's got the Big Banks shaking in their boots.

Here's why.

The 21st Century Act would separate institutions with savings and checking accounts, in other words FDIC-insured depository commercial banks, from investment and trading "banks" engaged in capital markets activities, most of which are on the border between speculation and manipulation.

Finally!

The senators noted that, "Under Glass-Steagall, major investment banks such as Drexel Burnham and Salomon Brothers failed without creating serious contagion in the broader economy. But in the post-Glass-Steagall world of the 2008 crisis, the failure of investment banks like Bear Stearns and Lehman threatened the entire economy."

That's right on the money!

Unless, of course, you don't get the connection.

Then you' might say something like, "It's easy to say that if the investment banks are torn away from commercial banking and deposit gathering that the government can simply 'let them all fail' during a time of crisis. But if there is a financial meltdown like we saw in 2008, and one or two investment banks go down, with all of their counterparties, including commercial banks, suffering as a result, it's a fair bet that the government will be back in the bailout business."

Yeah, that's what you'd say if you just don't get it. And that's what Philip van Doorn at TheStreet.com said this morning.

Seriously Phil?

Here's what you don't get.

You used the word "counterparties," Phil. There's the connection. You see, Bear and Lehman threatened the entire system, even though they weren't FDIC-insured depository institutions precisely because their counterparties were FDIC-insured depository institutions. Do you get it now? All the TBTF FDIC-backstopped (that means taxpayers are the drain-plugging tools) banks were doing exactly what Bear and Lehman were doing. Tthat's how they got to be counterparties. If there was separation, they wouldn't be counterparties to troubled speculators because they would jacked-up speculators. I almost want to say… you cementhead!

Or, if you're a shill for crony capitalism on steroids, you might say something like, "Setting the Record Straight: Glass-Steagall Would Not Have Prevented 2008 Crisis."

Yep, that came out of an email yesterday from Hamilton Place Strategies, a crony club that advocates on behalf of banks.

Hey cementheads, get your heads out of your cement mixer. See the above note to Phil.

The only problem with trying to make banking "21st-century safe" is that we live in the new old age of robber barons, and they are the bankers and politicians they've bought.

So, the chance of this bill going anywhere lies precisely between slim and NONE.

Unless…

Shah

P.S. Less than 24 hours ago, I released my biggest, boldest prediction ever. Check it out here.

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About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. don larson | July 13, 2013

    God Bless Elizabeth Warren . . . and, Shelia Bair as well. Now there's two professionals I'd trust my Wallet to, anytime. Now, let's add David Walker and David Stockman to the Mix; and not forget, Shah, either. Wow! Now there is a power house of intelligence, financial experience, ethics, morality, patriotism, and the STRENGTH; to return America to Democratic Capitalism.

    Clearly, Walker knows the Budget and Deficit Problems; Warren and Bair KNOW Wall Street; and what they have done – – and, the kind of Shit, they are capable of doing. Further, they know too, where the Bodies are Buried! I have no doubt they have information that could send powerful people to the, "Big House," for many years to come.

    Shah; you are the Wall Street Insider, who has the Guts to stand up to the, "Street." Not many willing to do that, today. You must know ALL THE TRICKS OF THE TRADE!

    You talk about Competence; and the Willingness to do the Right Thing – – that's my Team for getting the Nation back on Track.

    don larson

  2. Loraine J Arrigo | July 13, 2013

    From Massachusetts

    I really didn't think that Senator Warren would make a difference in the current Congress, but at least she is trying with this bill. Congratulations Elizabeth!

    Congratulations & thank you Mr Gilani for spreading the word about this rational bill.

    For the rest of us, it is imperative to write our congressional leaders in support of this bill.

  3. Mark Fuzzy | July 13, 2013

    Shame on you for being so naive.
    Everything in your article is so much political rhetoric, useless hot air.
    You have no idea what Ms. Warren's real intent is.
    You have no idea what the legislation will look like.
    To celebrate legislation based on how it's being marketed is like betting on a horse solely because it's named "Sure Thing."
    Is this how you guys make your investment decisions too?

  4. rich | July 13, 2013

    thank you.

  5. Louis Martinez | July 14, 2013

    Shah,

    Don't be fooled by the sell out senators you mentioned in your article above. They are not peddling the real Glass-Steagall principle. The real deal is Rep. Marcy Kaptur's H.R. 129, Return To Prudent Banking Act of 2013 (with 69 cosponsors) and Senator Tom Harkin's companion bill S. 985, the same act put in place by FDR during the Great Depression, it worked well for over 60 years until the banksters got it repealed in 1999. Look what's happened since. Time to stop screwing around with these diversionary, phony, sell out the American public measures by the likes of Warren, McCain, et al. The Full Recovery Program for the United States consists of passing the real Glass-Steagall (H.R. 129), reestablishing Alexander Hamilton's National Bank CREDIT SYSTEM, in order to build JFK's dream project-N.A.W.A.P.A. (North American Water and Power Alliance). This is the American system, essentially the same system used by FDR for our nation's sovereignty and future based on the physical economy, not the Wall Street and City of London's monetary system. All you patriots, tell Congress to pass H.R. 129 and S. 985, NOW!

    Details at LaRouchepac.com.

    Louis

  6. Thomas Aldrich | July 14, 2013

    We need to do the same thing Iceland did. Iceland prosecuted and jailed all their major bankers for causing the worst downturn since the great depression. Since then Icelands economy has been growing while our economy has stagnated.

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