The overall stock market is staging a big rally at the open of trading this morning in New York, but that is not going to calm growing anxieties over how badly systemically risky global banks traded in Friday and Monday’s two days of carnage. Watching tens of billions of equity market capital vaporize at the mega banks in two trading sessions of just 6-1/2 hours each has put renewed attention on separating the insured depository banks that are backstopped by the taxpayer from the high risk investment banks and brokerage firms on Wall Street. That effort has just gained a lot more traction.
Quietly, with little media fanfare, restoring the Glass-Steagall Act has been added to the final draft of the Democratic Platform. The passage reads:
“The Democratic Platform will make clear that Wall Street cannot be an island unto itself, gambling trillions in risky financial instruments and making huge profits, all the while thinking that taxpayers will be there to bail them out again. The draft calls for defending and expanding Dodd-Frank. The Clinton and Sanders teams brought forward an amendment for an updated and modernized version of Glass-Steagall and breaking up too big to fail financial institutions that pose a systemic risk to the stability of our economy, which the Committee unanimously adopted.”
The two overarching questions now are whether the effort to restore the Glass-Steagall Act will come in time to prevent another epic crash of the banks or if there will be soiled, invisible hands working at the upcoming Democratic Platform meeting in Orlando, Florida on July 8-9 to gut the Glass-Steagall amendment from the party platform before the full Platform Committee votes.