Invariant Values: Finance, the Crisis of Plantation Capital and the Parable of Glass-Steagall

A draft (as pdf) of a critical essay on the Banking Act of 1933, otherwise known as Glass-Steagall. Quite a bit on the history of the legislation, its co-sponsors and their role in preserving and facilitating racial segregation, the financing of the Transatlantic slave trade and the underlying theory of money and banking.

Below an excerpt, on why it’s important to clarify today what Glass-Steagall is, and is not. Since it’s still in draft, and possibly controversial given how widespread support is for its reinstatement, feedback welcome.

During the 2016 presidential elections in the United States, both Republican and Democratic platforms were amended to include calls to reinstate some version of the Banking Act of 1933, often referred to as the Glass-Steagall Act. The final version of the 2016 Republican platform stated: “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment” (RNC 2016, 28). Announcing the amendment to the platform at the Convention, Donald Trump’s campaign chair, Paul Manafort, described Glass-Steagall as a policy which creates “barriers between what big banks can do,” and went on to suggest that its restoration would mean support for smaller banks and “Main Street” (Edwards 2016). The Democratic Party platform, for its part, called for “an updated and modernized version of Glass-Steagall,” characterized as an instrument that would stop banks being “able to gamble with taxpayers’ deposits or pose an undue risk to Main Street” (DNC 2016, 11). In making these arguments, proponents of Glass-Steagall mischaracterized the Act itself, its impact on and significance to the history of financial crises in which it emerged, the effects of its partial repeal by the Gramm-Leach-Bliley Act in 1999, and the likely impact on financial crises were some version of it to be reintroduced. In a 2012 interview with the New York Times, one of the most prominent advocates of Glass-Steagall’s reinstatement, Senator Elizabeth Warren, is quoted as saying that “even if it [Glass-Steagall] wouldn’t have prevented the financial crisis … it is an easy issue for the public to understand,” adding: “‘you can build public attention behind’ it.” In her view, it is a “more of a symbol of what needs to happen to regulations than the specifics related to the act itself.”