The following is an excerpt from Zach Carter | March 11, 2017 | Huffingtonpost.com |
WASHINGTON ― The Republican Party has been allied with Wall Street since the presidency of William Howard Taft. So its official 2016 policy platform was more than a little startling. Discarding decades of orthodoxy, President Donald Trump’s campaign called to reinstate Glass-Steagall, a Depression-era law crafted by Democrats that would force the break-up of the nation’s six largest banks.
Trump’s advisers were wielding a devious, wonky cudgel. Hillary Clinton’s lucrative speeches to Goldman Sachs and other big banks were not sitting well with Democrats, Republicans or her own staff. Her husband had delivered the killing blow to Glass-Steagall in 1999 by granting his signature to a bill repealing the law ― a move widely blamed for fueling the 2008 financial crisis. By pledging to resurrect Glass-Steagall, Trump was positioning Republicans as populist crusaders for working people, shoving Democrats across the wrong side of the line in the ideological battle against the Washington-Wall Street axis voters held responsible for the Great Recession.
Combined with trade rhetoric cribbed from populist Democrats (and strong doses of flagrant racism), Trump’s messaging delivered. Working class voters came out in droves for a New York City billionaire who literally seated himself on a golden throne at the Republican National Convention.
Glass-Steagall was a blunt, effective instrument in its day. The law prohibited banks that accept deposits and make loans from placing bets in the much riskier securities markets. It was originally designed to end conflicts of interest that had allowed large firms to rip off their clients in the run-up to the 1929 stock market crash. But the law ultimately served a stronger purpose due to the advent of federal deposit insurance. Since the government guarantees depositors can’t lose their money in a bank failure, deposits function as an especially cheap source of funding for banks. Glass-Steagall prevented this funding from flowing to hot, high-flying speculation. This not only protected taxpayers from having to bail out bad bets, it discouraged excessive risk-taking by making it more expensive.
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