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Italian Government Crushes Glass-Steagall Issue in Senate Vote

April 8, 2016 (EIRNS)—A battle for Glass-Steagall was fought and lost in the Italian Parliament on April 5, when Prime Minister Matteo Renzi’s "Too small to survive" reform of credit unions was voted up without amendments that would have conditioned the reform to a Glass-Steagall-like banking separation.

Two amendments were first pushed in the Senate Finance Committee, one by Gruppo Misto (mostly SEL and two M5S members) and the other by Lega representatives. Both called for a strict separation between commercial and investment banks. The former was withdrawn, and the latter was voted down.

However, the issue was brought in the floor debate through a so-called "preliminary question" (QP3). The question was rejected.

The text of QP3 said, among other things, that contrary to what the government says, "stability of the banking and financial system can be achieved through the planning and implementation of more rigorous rules against conflicts of interest, through the separation of investment banks from commercial banks, and not through forcing a gigantism which, as past years’ experience and the situation of European large banks show, does not exclude at all that serious problems of insolvency and stocks volatility emerge, given also the aggravation of problems due to the overall exposure in derivatives."

In the floor discussion, Sen. Francesco Molinari emphasized that the model of credit unions that the government bill is abolishing "has been the only antidote to contain the excessive power of large financial conglomerates and today is the more important, in the expectation that we go back to the model of [banking] separation which had protected from the crisis those banking systems which had not abandoned it ... in which commercial banks (collecting deposits and issuing loans) and investment banks (issuing and trading securities) are separated."

Sen. Laura Bottici (M5S) said: "It is not true that these reforms will allow banks to give credit to small enterprises or troubled families. It is a lie. The Italian banking system needs healthy managers and real controls. We must separate investment banks from commercial banks."

The behavior of the Senate is exemplary of the de facto suppression of the legislative process typical of most EU member states. In the merit, the reform of credit unions, which are now forced to group under a large holding, has been ordered by the financial markets. Instead of fighting the Too Big Too Fail, this process goes in the direction of building another TBTF.

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