Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Ms. WARREN. Mr. President, I rise today to speak in support of the 21st Century Glass-Steagall Act. I am honored to join Senators MCCAIN, CANTWELL, and KING in introducing this bill.

Washington is a partisan place and this Congress has its share of partisan bills, but we have all joined together because we all want a more stable economy that works not just for those at the top but for everyone.

Seven years ago, Wall Street's high-risk bets brought our economy to its knees. The Dallas Fed estimates that the total cost of the crash was $14 trillion. Millions of families lost their homes. Millions of people lost their savings. Millions of people lost their jobs. And even today, millions of hard-working, play-by-the-rules people are still struggling to survive.Ms. WARREN. Mr. President, I rise today to speak in support of the 21st Century Glass-Steagall Act. I am honored to join Senators MCCAIN, CANTWELL, and KING in introducing this bill.

Washington is a partisan place and this Congress has its share of partisan bills, but we have all joined together because we all want a more stable economy that works not just for those at the top but for everyone.

Seven years ago, Wall Street's high-risk bets brought our economy to its knees. The Dallas Fed estimates that the total cost of the crash was $14 trillion. Millions of families lost their homes. Millions of people lost their savings. Millions of people lost their jobs. And even today, millions of hard-working, play-by-the-rules people are still struggling to survive.

Over the past 7 years, we have made some real progress dialing back the risk of a future crisis. But despite that progress, the biggest banks continue to threaten the economy. The biggest banks are collectively much bigger today than they were 7 years ago. They continue to engage in dangerous, high-risk practices. And with each new headline and subsequent legal settlement, it becomes clearer that they keep chasing profits even if it means breaking the law.

The big banks weren't always allowed to take on big risks while enjoying the benefits of taxpayer guarantees. Four years after the 1929 Wall Street crash, Congress passed the Glass-Steagall Act, which is best known for separating investment banks and their risk-taking from commercial banks that manage savings accounts, checking accounts, and offer other banking services.

For 50 years, Glass-Steagall played a central role in keeping our country safe. Traditional banking stayed separate from high-risk Wall Street banking. There wasn't a single major financial crisis, and the financial sector helped contribute to a sustained, broad-based economic growth that helped build America's middle class. But the big traditional banks wanted the higher profits they could get from taking more risks, and investors in the big investment banks wanted access to the low-cost, insured deposits of traditional banks, so they teamed up to try to tear down Glass-Steagall's wall. Starting in the 1980s, regulators of the Federal Reserve and the Office of the Comptroller of the Currency buckled under industry pressure and began poking bigger and bigger holes in the wall between investment and commercial banking, and, after 12 separate attempts, Congress repealed most of Glass-Steagall in 1999.

The 21st Century Glass-Steagall Act will rebuild the wall between commercial banks and investment banks, separating traditional banks that offer savings and checking accounts and that are insured by the FDIC from their riskier counterparts on Wall Street. Banks can choose: Take big risks using investors' money or be very careful using depositors' money--but no more mixing the two.

The 21st Century Glass-Steagall Act also fills in the holes the regulators punched in the original Glass-Steagall, and it recognizes that the financial markets have become more complicated since the 1930s, so it covers products that did not exist when Glass-Steagall was originally passed.

By itself, the 21st Century Glass-Steagall Act will not end too big to fail and implicit government subsidies, but it will make financial institutions smaller, safer, and move us in the right direction. By separating depository institutions from riskier activities, large financial institutions will shrink in size and won't be able to rely on FDIC insurance as a safety net for their high-risk activities. It will stop the game these banks have played for far too long--heads, the big banks win and take all the profits; tails, the taxpayers lose and get stuck with the bill.

Our proposal has an added benefit--it is simple. It doesn't require thousands of pages of new rules. And better still, if we rebuilt the wall between commercial banks and investment banks, we could even cut back on some of the other rules we have in place to stop big banks from taking on too much risk.

If financial institutions actually have to face the consequences of their business decisions, if they cannot rely on government insurance to subsidize their riskiest activities, then the investors in those institutions will have a stronger incentive to closely monitor those risks before they get out of hand and take down the entire economy. Government regulators could play a more limited role, and that is an outcome everyone should like.

It has now been 7 years since the great financial crash. Most of the banks that were too big to fail in 2008 are even bigger now. Shortly after they were bailed out by the American taxpayers, these banks once again started raking in billions of dollars in profits. In fact, in 2014 they posted two of their most profitable quarters in the last 20 years. Between 2010 and 2013, the median compensation for a big-bank CEO was about $15 million a year while median household income in the United States during that same period--that is, income for the whole family--was barely above $50,000. The big banks and their executives have recovered handsomely from the crisis they helped create while too many other Americans are still scraping to get by.

We weren't sent to Washington to work for the big banks. It is time for a banking system that serves the best interests of the American people, not just those few at the top. The 21st Century Glass-Steagall Act is an important step in the right direction, and I ask my colleagues to join me in supporting this bipartisan measure to strengthen our economy.

Over the past 7 years, we have made some real progress dialing back the risk of a future crisis. But despite that progress, the biggest banks continue to threaten the economy. The biggest banks are collectively much bigger today than they were 7 years ago. They continue to engage in dangerous, high-risk practices. And with each new headline and subsequent legal settlement, it becomes clearer that they keep chasing profits even if it means breaking the law.

The big banks weren't always allowed to take on big risks while enjoying the benefits of taxpayer guarantees. Four years after the 1929 Wall Street crash, Congress passed the Glass-Steagall Act, which is best known for separating investment banks and their risk-taking from commercial banks that manage savings accounts, checking accounts, and offer other banking services.

For 50 years, Glass-Steagall played a central role in keeping our country safe. Traditional banking stayed separate from high-risk Wall Street banking. There wasn't a single major financial crisis, and the financial sector helped contribute to a sustained, broad-based economic growth that helped build America's middle class. But the big traditional banks wanted the higher profits they could get from taking more risks, and investors in the big investment banks wanted access to the low-cost, insured deposits of traditional banks, so they teamed up to try to tear down Glass-Steagall's wall. Starting in the 1980s, regulators of the Federal Reserve and the Office of the Comptroller of the Currency buckled under industry pressure and began poking bigger and bigger holes in the wall between investment and commercial banking, and, after 12 separate attempts, Congress repealed most of Glass-Steagall in 1999.

The 21st Century Glass-Steagall Act will rebuild the wall between commercial banks and investment banks, separating traditional banks that offer savings and checking accounts and that are insured by the FDIC from their riskier counterparts on Wall Street. Banks can choose: Take big risks using investors' money or be very careful using depositors' money--but no more mixing the two.

The 21st Century Glass-Steagall Act also fills in the holes the regulators punched in the original Glass-Steagall, and it recognizes that the financial markets have become more complicated since the 1930s, so it covers products that did not exist when Glass-Steagall was originally passed.

By itself, the 21st Century Glass-Steagall Act will not end too big to fail and implicit government subsidies, but it will make financial institutions smaller, safer, and move us in the right direction. By separating depository institutions from riskier activities, large financial institutions will shrink in size and won't be able to rely on FDIC insurance as a safety net for their high-risk activities. It will stop the game these banks have played for far too long--heads, the big banks win and take all the profits; tails, the taxpayers lose and get stuck with the bill.

Our proposal has an added benefit--it is simple. It doesn't require thousands of pages of new rules. And better still, if we rebuilt the wall between commercial banks and investment banks, we could even cut back on some of the other rules we have in place to stop big banks from taking on too much risk.

If financial institutions actually have to face the consequences of their business decisions, if they cannot rely on government insurance to subsidize their riskiest activities, then the investors in those institutions will have a stronger incentive to closely monitor those risks before they get out of hand and take down the entire economy. Government regulators could play a more limited role, and that is an outcome everyone should like.

It has now been 7 years since the great financial crash. Most of the banks that were too big to fail in 2008 are even bigger now. Shortly after they were bailed out by the American taxpayers, these banks once again started raking in billions of dollars in profits. In fact, in 2014 they posted two of their most profitable quarters in the last 20 years. Between 2010 and 2013, the median compensation for a big-bank CEO was about $15 million a year while median household income in the United States during that same period--that is, income for the whole family--was barely above $50,000. The big banks and their executives have recovered handsomely from the crisis they helped create while too many other Americans are still scraping to get by.

We weren't sent to Washington to work for the big banks. It is time for a banking system that serves the best interests of the American people, not just those few at the top. The 21st Century Glass-Steagall Act is an important step in the right direction, and I ask my colleagues to join me in supporting this bipartisan measure to strengthen our economy.

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