Glass-Steagall Fight Heats Up
June 17, 2010 (EIRNS)While three regional Federal Reserve presidents have now called for the reinstitution of Glass Steagall, Federal Reserve Chairman Ben Bernanke on June 16 rejected the reinstating of Glass-Steagall. In a response to a question, while speaking at a conference sponsored by the Squam Lake Group of academic economists and former policymakers in New York City, Bernanke emphatically stated that reinstating Glass Steagall would "not be constructive" and is "not on the agenda."
Bernanke, allegedly a scholar about the history of the New Deal, lied that during the 1930s, commercial and investment banking was divided by the Glass-Steagall Act in order to end conflicts of interest, and then claimed, citing research, that conflicts of interest were not a major cause of the Great Depression. Bernanke observed that in the financial crisis, commercial and investment banks got into serious problems, but it's not clear that the interaction of the two created serious problems. "It's not clear it would be particularly constructive to revive Glass Steagall," he said.
Attendees at the conference included some government officials, top officials from the Internatinal Monetary Fund and the Organization for Economic Cooperation and Development, and bankers from the world's largest financial firms.
But Bernanke should not expect that his word will quiet down the growing demand for Glass-Steagall. In the face of what all sentient bankers realize to be a new round of devastating collapse, the sentiment in favor of bringing back separation between commercial and investment banks, and letting the phony debts of the latter get written off the books, is spreading rapidly. This is being aided by the national campaign thrust of LaRouche PAC, which is taking a resolution to restore Glass-Steagall and ban derivatives to city councils around the country, sparking debate on national economic policy. Although only one local council so far, the Borough Council of Lansford, Pennsylvania, has passed the resolution, many more are taking it under consideration.