the tindog coffeehouse

In an interesting turn of events, Senators Maria Cantwell and John McCain have proposed reinstating the Glass-Steagall Act, which — among other things — prevented commercial banks from merging with investment banks.  That restriction, first passed in 1933 at the height of the Great Depression, was repealed in 1999 by the Gramm-Leach-Bliley Act, and it was that law that set in motion much of the financial meltdown that we’re still dealing with today.

“I want to ensure that never again we stick the American taxpayer with another $700 billion or even larger tab to bail out the financial industry,” Mr. McCain said, referring to the Treasury bailout program of financial firms.

Mr. McCain said he isn’t opposed to investment banks taking risks to pursue greater returns, but he doesn’t believe these risks should be taken using retail banking depositors’ money.

As the Wall Street Journal points out, it’s unlikely that the call to separate the banks will go very far in Congress, and Newsweek has compared it to “unscrambling an egg”.  So why is it so interesting?  Because McCain voted for Gramm-Leach-Bliley in 1999 and because one of the authors of the bill, Phil Gramm, was McCain’s chief economic adviser during his presidential campaign.  Which makes me wonder if McCain would be making the same call had he won the election.  My guess is, probably not.

Previously:
The root cause of the subprime meltdown