Italian M5S Parliamentarians Push for Glass-Steagall at European Parliament Event
May 12, 2016 (EIRNS)—A proposal for re-introducing a banking- separation system after the Glass-Steagall model was highlighted yesterday at the European Parliament by representatives of Italy’s Five Star (M5S) party, including the Vice President of Italy’s Chamber of Deputies, Luigi di Maio, and the M5S spokesman for financial policies at the European Parliament, Marco Zanni.
At a press conference in Strasbourg, first Zanni presented a set of proposals for a reform of the banking system which includes banking separation, and during the question-and-answer period both he and Di Maio elaborated the issue.
"In the framework of the European Banking Structural Reform," Zanni said,
"we have proposed a bank separation, a modern European Glass-Steagall Act which allows separating the good part, the useful part of the banking system—the one that issues credit to the real economy and to families—from the speculative part. The former must be protected, the latter must not."
During the questioning, an Italian TV reporter, who had evidently not paid attention, asked whether the simplest thing wouldn’t be banking separation, adding, "like Obama did."
Di Maio answered:
"This is not only part of our program—and by the way, my colleague Zanni mentioned it a moment ago—but also of the set of proposals we introduced in the Parliament, before the scandals involving the four banks ... and especially before the bail-in. This idea of separating commercial banks from speculative banks is not only part of our election program but above all is a draft bill filed by our colleagues Villarosa and Pesco in the Finance Committee of the Chamber of Deputies. It clearly intersects another set of proposals that address the central bank’s conflict of interests. We cannot allow private banks inside the Bank of Italy [central bank]. This mechanism creates a powerful conflict of interest that could also explain the lack of control on other banks involved in scandals, which ... have affected the lives of hundreds of thousands of families in Italy.
"Therefore, banking separation is a must today, including because, from the technical standpoint, I have to be able to tell the Italian citizen: Take your money to a bank that makes loans to the real economy, or, take your money instead to a bank that plays with it in the stock market."
EIR followed up with a question to Zanni, who was recently in Washington on a visit organized by EIR, and met several members of Congress. We asked him to explain whether the debate about Glass-Steagall in the U.S.A. is more advanced.
"Yes, together with colleague Marco Valli ... we travelled to the United States. Since the two of us are working on the Banking Structural Reform, the legislative framework where we introduced the proposal of a European-wide banking separation, we decided to compare it with the American situation, where the debate is much more lively, since even two of the Democratic pre-candidates have pushed this issue a lot, i.e., re-establishing a simple law, the Glass-Steagall Act, which would make the American banking system safe. The American banking system has many of the same risks which were there before the 2008 Lehman crisis.
"Our meetings were very positive, because there is really an open debate, not only in the political world, but also in the world, let us say, of civil society and technical institutions. There have been many statements—let me mention Neil Kashkari, who chairs the Federal Reserve in Minneapolis and is the former head of TARP, the ’bazooka’ set up by former Treasury Secretary Paulson to bail out the American financial system in 2008; but also the vice chairman of the FDIC [Thomas Hoenig], the agency that protects American depositors. They have clearly said that as long as the Wall Street giants are not broken up, as long as the TBTF banks are not broken up, the systemic risk to the American system and therefore to the global and European system, is always going to be there. Lately, the former governor of the Bank of England, Lord Mervyn King, also presented a book in which, as former governor of one among the most important central banks in the world, he said: Gentlemen, the only way to make the banking system safe is to separate the banks and break up the TBTF banks, i.e., separate the good part of the activities, the one in support of the economy, from the purely speculative one.
"Therefore, the debate in the United States is surely more advanced than in Europe. We hope that this can have a positive effect on our work, because the Banking Structural Reform has been blocked by the opposition of some large groups in the European Parliament."