Italian MEPs: Go Back to FDR's Glass-Steagall Model
MEPs Marco Zanni and Marco Valli explain Glass-Steagall (video in Italian)
In a press statement released on Feb. 23, European Parliament Members Marco Valli and Marco Zanni explain their initiative for turning the EU draft bill on bank resolution into a Glass-Steagall Act.
"Soon after the great 1929 crisis, U.S. President F.D. Roosevelt rushed to stop speculation as a cause for the crisis. In 1933, through the Glass-Steagall Act, traditional banking and investment banking were unconditionally separated. Sixty-six years later, policymaking capitulates in the face of Wall Street sharks. The Republican-led U.S. Congress tears FDR's reform apart. Clinton, a Democratic President, enacts the Counterreformation.
"History repeats itself with the major economic crisis that started in 2008. Banks used the power of their universal model to carry out speculative activities and concern themselves exclusively with their easy gains, without any longer helping small and medium enterprises [smes] and the real economy. The 'public hand' intervenes with citizens' and taxpayers' money when something goes wrong.
"...In order to avoid this being repeated in the future, we need a real reform of the system, that prevents banks from speculating with depositors' and customers' funds.
"[concerning] the fake reform by the Commission. In the face of the 2008 crisis, European politicians behaved either as ignorant or as accomplices. The former did not understand anything and the latter functioned as useful idiots in order to erect smokescreens and distract public opinion.... The Accomplices bent the law to the will of the strongest....
"How can you reduce systemic risk if one single bank has a mountain of speculative assets equal to a hundred times the deposits of families and companies? The European Parliament is discussing a draft bill on structural measures aiming at boosting resilience of EU credit institutions. The stated target is to separate commercial and investment banks. Beautiful! Unfortunately, it is a fraud. M5S MEPs Marco Valli and Marco Zanni have examined the Commission draft and have discovered that this Europe is just pretending to do something."
After providing some evidence from articles of the draft bill (separation only of "certain" activities, numerous exceptions, etc.), the two MEPs state:
"In order to avoid new crises, the M5S amendments propose to implement a modern Glass-Steagall Act, through:
"Clear and mandatory separation between traditional and speculative-investment banking activities;
"Prohibit banks from holding equities in non-financial enterprises, thus avoiding harmful conflicts of interest;
"Perpetual interdiction of managers who violate regulations;
"Exemption for small banks which do not reach a threshold value for speculative activities and leverage on balance sheet.
"We must go back to the model of Roosevelt's Glass-Steagall Act: On one side traditional banks, performing only activities in support of the real economy (collecting deposits and loans to SMEs), enjoying government protection; on the other side investment banks which can carry out their speculative activities without government protection, thus free to fail without being bailed out with taxpayers' money.
"Banking separation is first of all a reform of fiscal policy. Austerity was introduced because governments must collect billions of euros used to bail out banks...."