Finance

Renegade Democrats Want To Break Up Big Banks

A vote to end debate on the Senate's finance-reform bill failed yesterday. Almost all of the Democrats in the Senate voted in favor of the motion. But two opposed it: Maria Cantwell and Russ Feingold.

Both Senators want to re-instate a Depression-era rule that separates commercial and investment banks. Doing that would mean the break-up of some of the nation's biggest banks.

"We need to eliminate the risk posed to our economy by 'too big to fail' financial firms and to reinstate the protective firewalls between Main Street banks and Wall Street firms," Feingold said in a statement yesterday.

The statement also noted that Feingold was one of eight Senators who in 1999 voted against the repeal of Glass-Steagall, the law that separated investment and commercial banking. (Investment banks are Wall Street firms that underwrite stocks and bonds and advise companies on acquisitions; commercial banks make loans and take deposits.)

Maria Cantwell, the other Dem who voted no yesterday, is the co-sponsor of an amendment that "restores safeguards modeled after the 1933 Glass-Steagall Act." That amendment was never brought to the Senate floor for an up-or-down vote.

But despite yesterday's vote, the re-instatement of Glass-Steagall remains unlikely. Big banks say they need to be big to compete in the global economy, and that big corporate customers want a bank that can provide multiple services. Most Senators seem to support this argument.

And even Cantwell said in a statement yesterday that, while she would like a vote on her amendment, it was not her "primary concern."

The more important issue for Cantwell is a separate amendment that would tighten the rules on trading of derivatives. That amendment has also not been brought to the floor for an up-or-down vote. (For more on derivatives reform, see this post from yesterday.

The final vote yesterday was 57-42 (60 votes are needed to cut off debate). Harry Reid changed his vote to "no" at the last minute, a procedural move that allows him to call another vote on the issue.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.