Glass-Steagall redux

A bipartisan bill before the U.S. Senate would reinstate the separation of retail from investment banking. That is good public policy: Banks should be banks, not speculators.

The Glass-Steagall Act, passed in 1933 during the Depression, imposed that separation. It was repealed by industry deregulation in 1999. If it had stayed on the books, we might have avoided part of the 2008 financial crisis.

The sponsors of the Senate bill, Democrat Elizabeth Warren of Massachusetts and Republican John McCain of Arizona, say their legislation would again separate traditional functions of banking, such as selling mortgages and issuing checking and savings accounts, from speculative commercial activities in real estate and the stock market.

Letting banks get into other businesses, many of them high-risk, did great damage to the economy and many consumers during the past decade. The rise of mega-banks encouraged by the undoing of Glass-Steagall has not been good for anyone but a few highfliers who rolled the dice and won.

Can a new Glass-Steagall law pass in this Congress? Probably not. But this is legislation that Ohio’s senators should support. It ought to pass, eventually.