December 18, 2009 by Canadian Underwriter
U.S. Senators Maria Cantwell (D-WA) and John McCain (R-AZ) have introduced a bipartisan bill that would prohibit U.S. commercial banks from engaging in all insurance activities, as well as prevent them from affiliating with investment banks.
Essentially, the proposed bill would mark a return to the 1933 days of the Glass-Stegall legislative wall between commercial and investment banking.
“For nearly 60 years, this firewall maintained the integrity of the banking system, prevented self-dealing and other financial abuses and limited stock market speculation,” Cantwell and McCain announced in a joint online statement.
The purpose of the Glass-Stegall legislation was to protect depositor money from being put at risk by Wall Street speculation. This kind of security needs to be re-introduced, the senators said, in light of the financial crisis arising from subprime mortgage lending activities.
“I am pleased to be working with Senator Cantwell on this important issue,” McCain said in a statement. “My reasons for joining this effort are simple. I want to ensure that we never stick the American taxpayer with another $700-billion — or even larger — tab to bailout the financial industry…
“No single financial institution should be so big that its failure would bring ruin to our economy and destroy millions of American jobs. This country would be better served if we limit the activities of these financial institutions.”
The Cantwell-McCain bill would prohibit commercial banks from affiliating in any manner with investment banks and vice versa; prevent officers, directors, and employees of a commercial bank from serving as an officer, director, or employee of an investment bank and vice versa; prohibit commercial banks from engaging in all insurance activities; and establish one year from date of enactment as the deadline for financial houses to transition and separate their commercial and investment banking operations.