Finally, Barack Obama today unveiled a proposed major curb on Wall Street that would revive the "spirit of Glass-Steagall" — the Depression-era law that would have prevented last year's Wall Street meltdown if it hadn't been abolished during the Clinton administration.
|Volcker: He told Obama so.|
In fact, new firewalls would separate commercial banking from investment banking, preventing banks from recklessly gambling as much and as often with the money they've raked in from Americans' deposits and mortgage payments.
We're not talking about the rigorous separation of commercial banking from investment banking that the Depression-era Glass-Steagall Act demanded until it was in effect erased by Bill Clinton. Obama advisers like Larry Summers also worked hard to get rid of Glass-Steagall.
But now, seemingly in electoral desperation, Obama has chosen to follow Paul Volcker's advice instead. Details aren't yet known, but just the new Obama plan's general outline calls for a big shift in how Wall Street currently does business. It would in effect re-criminalize the unholy alliances and connections that allowed monumental consolidation of banks and let them gamble with our money and mortgages in ways that for decades had been highly illegal.
What does Wall Street think about this? See "Goldman Pans Glass Steagall 2.0."
Initial odds on passage of such a sweeping new set of laws and regulations? Slim to none. But the Democrats are hoping it sounds good to voters, especially in the wake of the GOP's new 41-59 Senate majority (as my colleague Roy Edroso put it yesterday).