Jul 18, 2016 - 3:00pm

GOP Looks to Last Century with Glass-Steagall Revival

Executive Vice President, U.S. Chamber Center for Capital Markets Competitiveness
Senior Advisor to the Senior Executive Vice President


As the Republican National Convention kicks off in Cleveland today, eyes turn toward the recently released party platform and a push to revive the Glass-Steagall Act

Last April, Chamber President and CEO Thomas J. Donohue explained why Glass-Steagall wouldn’t have prevented the 2008 financial crisis and why it is an extremely outdated approach for the 21st century global economy.

“The proposed solution we often hear to the perceived "too big to fail" problem - a reintroduction of the 1930s era Glass-Steagall Act — misses the mark for how businesses use banks and why our diverse system sustains the world's largest economy. Re-imposing Glass-Steagall would require universal financial firms to split up into separate commercial and investment banks.”

“In an inter-connected global economy, America's global banks help companies like John Deere compete for business and find customers around the world, boosting exports and U.S. jobs. Breaking up our banks will mean more business for Chinese banks (which are much larger than ours, as Warren Buffet pointed out), but it won't do much for America. 

If you are an American company trying to close a large deal, it is easier and less costly to have one firm provide financing than to get 30 organizations in a room. Consumers are also living in a rapidly changing financial world — online lending, mobile payment options, a wide variety of affordable investment and retirement options and the emergence of peer-to-peer borrowing and lending networks.

It is now possible to bank with a single large financial institution and pay a mortgage, deposit a check, save for college, pay for coffee — and never even take out your wallet. A 21st century U.S. economy needs a strong, flexible and innovative 21st century financial system, not a pencil-and-ledger Roosevelt-era system.

Even Sen. Elizabeth Warren has conceded to The New York Times that the repeal of Glass-Steagall restrictions did not cause, nor would Glass-Steagall have prevented, a financial crisis that followed the collapse in housing prices in 2007.

America's economy is poised to take advantage of all the technological innovation in financial services. But to do so, we need thoughtful, forward-looking leadership and smart regulation, not nostalgic proposals like Glass-Steagall that will only hurt our economy by attempting to turn back the clock more than 80 years.”

To learn more about how America’s Main Street businesses benefit from a robust financial services system with global, national and community banks meeting their everyday needs, check out our June 2016 report “Financing Growth: The Impact of Financial Regulation.” It includes input from more than 300 corporate finance professionals about their core financial services needs and the indirect regulatory impact of all the newly adopted financial regulations.

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About the Author

About the Author

Tom Quaadman headshot
Executive Vice President, U.S. Chamber Center for Capital Markets Competitiveness
Senior Advisor to the Senior Executive Vice President

Tom Quaadman develops and executes strategic policies to implement a global corporate financial reporting system, address ongoing attempts of minority shareholder abuse of the proxy system, communicate the benefits of efficient American capital markets, and promote an innovation economy and the long-term interests of all investors.