Understanding why financial foundations are broken and how they must be restored

2016 political contests should be all about which leaders articulate the most defined plans to support a revolution of our energy, infrastructure and finance systems. All 3 issues are foundational, and present the most obvious opportunity to make dramatic and lasting improvement for our future.

A failure to enforce necessary controls and prosecutions in finance over the past 20 years has been a significant cause of the secular decline now gripping the global economy. It doesn’t need to be this way. We have the historical precedent to make lasting improvement. Better Markets has put together a helpful primer on the US Presidential candidates and who is saying what so far, along with a detailed summary of the Glass-Steagall financial reform law and efforts to reinstate it. Read the 8 pages here:

After the Great Crash of 1929 and the Great Depression of the 1930s, laws were passed to create layers of protections between the gambling on Wall Street and the hardworking American families on Main Street. Importantly, these layers of protections were of different types: structural, regulatory and supervisory.

The Glass Steagall Act was the key structural legal protection enacted. It prohibited the same bank from engaging in both relatively low risk traditional commercial banking (using FDIC insured and Fed backed savings accounts to make mortgage and business loans) and high risk investment banking (running mostly unregulated trading and securities). For more than 60 years, the Glass Steagall Act kept those activities separate and during that time, the U.S.had the highest rate of economic growth in its history while the financial system avoided catastrophic crashes.

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