Letters

letters | Glass-Steagall revisited

Elizabeth Warren off mark in her solution to ‘too big to fail’

In her Sept. 18 op-ed “Scaling back ‘too big’ ” Senator Elizabeth Warren is right that enormous progress has been made since 2008 in improving the safety and stability of the financial system. Regulators have new tools to address a future crisis, bank capital has doubled, leverage has decreased, compensation practices have been aligned with long-term performance, and consumers have new protections. Warren is quite mistaken, however, on the issue of our banking system and in her proposed solution to “too big to fail.”

She ignores the fact that America’s biggest diversified commercial banks grew during the financial crisis because they proved to be a safe port in a terrible storm. The government asked Bank of America, JPMorgan, and Wells Fargo to buy their troubled peers Merrill Lynch, Bear Stearns, Washington Mutual, and Wachovia, protecting the economy from the instability arising from Lehman-like bankruptcies.

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Warren’s proposed solution to the perceived “too big to fail” problem — the 21st Century Glass-Steagall Act — would make the system more risky for the taxpayer by reintroducing the standalone broker-dealer model that proved unstable and by making the mergers of large firms impossible in a future crisis. Warren herself acknowledged in May 2012 that Glass-Steagall would not have prevented the 2008 financial crisis, calling the proposed measure symbolic. We need thoughtful leadership if we are going to grow our economy and create jobs, not symbolic proposals that take us backward.

Rob Nichols

President and CEO

Financial Services Forum

Washington

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