How Glass-Steagall Crashed the 2016 Conventions
July 29, 2016 12:00 PM
The Glass-Steagall Act of 1933 was an unexpected and prominent part of the Democratic and Republican conventions this year, as both parties added a call to reinstate the law as part of their party platforms. But that will be easier said than done, considering that lawmakers from both sides of the aisle have shown little interest in the idea. Following is a look at how a Depression-era law found its way to Cleveland and Philadelphia.
Donald Trump's top aide had a surprise announcement on the same day that the Republican National Convention started in Cleveland the GOP presidential nominee wanted to add a call to return Glass-Steagall to the party's platform. "That would create barriers between what the big banks can do and avoid some of the crisis that led to 2008," said Paul Manafort, Trump's campaign manager. Manafort described it as an idea that Trump had raised during the campaign, but it came as a total shock to fellow Republicans and other political observers.
Trump's gambit appeared to be a play to win over disaffected supporters of Sen. Bernie Sanders, the Vermont Democrat who lost to Hillary Clinton. Sanders had made breaking up the banks a key part of his campaign. During his acceptance speech on July 21, Trump urged Sanders' supporters to vote for him, arguing that Clinton had rigged the Democratic primaries.
But the call to restore Glass-Steagall caught GOP lawmakers off guard. Although some Republicans have supported such a plan, notably former presidential nominee Sen. John McCain, the majority of GOP policymakers are skeptical of a return to Glass-Steagall. "I was very disappointed that that got included, because frankly I think that will make our banks more vulnerable if we try and put Glass-Steagall back in and make them more likely to fail," said Rep. Steve Stivers, R-Ohio, a member of the House Financial Services Committee.
The Democrats kicked off the first night of their convention on July 25 with addresses from Sanders and Sen. Elizabeth Warren, D-Mass., both of whom made big banks a target . Sanders name-checked Glass-Steagall in his address, noting the call for a "21st century" version in the party platform. Warren didn't mention the law, but said Clinton would fight "to keep big banks accountable." During her address on Thursday night, Clinton barely mentioned banks, except to say that she would ensure that they would never again wreck the economy.
Yet among Democratic lawmakers, reinstating Glass-Steagall does not appear high on the priority list . Some argued Congress had already effectively done so by adding the Volcker Rule, which bans banks from proprietary trading, to the Dodd-Frank Act of 2010. Others said Glass-Steagall wouldn't work in the modern context. ""The old Glass-Steagall wasn't an effective law," said Rep. Brad Sherman, D-Calif., who instead wants to cap banks based on size.
