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John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) teamed up to Address the Real Cause of Financial Meltdown

Bill to reverse Gramm Act of 2000 will bring plenty of fireworks. Lobbists have mobilized and are on the offensive.

Yesterday, the decidedly odd couple of Senators John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) teamed up to introduce legislation that would restore the Glass-Steagall Act (aka the Banking Act of 1933), which would force giant banking institutions to choose between operating as a commercial bank or an investment bank. For decades, Glass-Steagall imposed a firewall between the two, until it was repealed in 1999 by the Gramm-Leach-Bliley act.

Give McCain and Cantwell a big round of applause for their effort, because in Washington, this seemingly obvious response to the financial crisis is considered the domain of wild-eyed hippies (and Paul Volcker.) It is, after all, the sort of idea that would bring real pain to the banking industry, who'd much rather we quickly

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Added: Dec-17-2009 
By: joalexan
In:
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Tags: John McCain, Maria Cantwell, GOP, Gramm Act, Financial Reform
Views: 8219 | Comments: 12 | Votes: 0 | Favorites: 0 | Shared: 1 | Updates: 0 | Times used in channels: 1
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  • Glass Steagall isn't so much the problem as Freddie Mac and Fannie Mae artificially inflating the housing market due to the liberal desire to make every American a homeowner, especially single mothers and minorities. The root cause is Carter's Community Reinvestment Act. No other developed nation in the world seperates retail banking from investment banking like the USA did prior to Glass-Steagall.

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    • You are an idiot - What was the financial exposure of Fann / Fred??? any ideas - $3.4T at the worst. Why did we loan banks $27T if all they had to cover was 3.4T??? Moron!

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    • The first bailout, if you recall, was to Freddie and Fannie. Freddie and Fannie guaranteed and underwrote 70% of all new mortgage loans in the USA since 2005. The FMs in conjunction with Congress were trying to make affordable housing for single mothers, minorities and low income Americans. It reached the level in 2006, that some people were getting home loans without any documentation at all.

      Here's two examples:
      1) $1.5M condo on $20K income? Prospective buyers lose $175K in Bellevue
      More..

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    • How much exposure was there in Frannie Mae and Freddie Mac? What was the loan value? What is the at risk mortgage amount? $3.5T? maybe - You trying to petal the idea that that at risk loan amount - Created a Global Economic meltdown estimated at $62T?

      How on earth does that happen?

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    • I told you in my last comment but I'm sure you didn't take the time to read the economic histories and assessments presented so I will reiterate with more simple examples:

      If I sold you a loan for $500 and charged you 7% interest, I make the whole 7% of the interest. If I think you're not a good risk and I sell your debt to another party, let's say, Bob and I keep 1% interest, then Bob has 6% of the profit being made and I have 1%. Bob can then bundle up your loan with a hundred other loans More..

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    • ...and Glass Steagall required banks to have assets to back there loans...The Gramm Act allowed banks not to have "Insurance" - or assets against their loans...they created a new financial instrement called a Credit Defauly Swap...and sold and sold and sold and sold the loans....When you can not pay the interest on a CDS the entire value comes due...Thus the meltdown....F/F - $3.5T exposure became a $62T problem because the loans were leaverage and leaverage beyond all reason...But I k More..

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  • my thoughts on mccain:
    http://www.liveleak.com/view?i=394_1223584316

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  • Well, odd couple or not, I hope they succeed. Thanks for the post, I didn't know Dorgan had been so prescient on the banking legislation.

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  • This is one of the reasons McCain isn't popular with conservatives as Sarah Palin is and probably typifies why he didn't win Election '08.

    McCain constantly targets the most easy political objects as a centrist rather than taking on the more major problem. The problem is the entitlement mentality, not that mortgages were bundled and sold as security investments. Those security investments would have been sound if Freddie and Fannie, along with Barney Franks, Chris Dodd and other democrats More..

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  • I absolutely agree that Glass-Steagal should be put back in place. Without it, it's just too easy to rob Peter to pay Paul in the bank world.

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  • Hell, I have trouble redeeming coupons in my supermarket.

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