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Feinstein_letter_Glass_Steagall

7/14/2011

Dear Mr. Wheat:

 Thank you for contacting me to express your support for reinstating the Glass-Steagall Act.  I appreciate the time you took to write and welcome the opportunity to respond. 

  The Glass-Steagall Act generally separated commercial banking activities (deposit taking and traditional lending) from investment banking (underwriting stock and issuing securities).  It was enacted in response to the stock market collapse during the Great Depression and intended to limit systemic risk associated with banks lending to businesses for which they were also underwriting stock.  During Senate consideration of financial reform legislation, Senators Maria Cantwell (D-WA) and John McCain (R-AZ) offered an amendment that would have effectively reinstated the Glass-Steagall Act.  However, this amendment did not receive a vote and was not included in the final version of the bill that passed the Senate. 

  You may be interested to know I was an original cosponsor of an amendment offered by Senators Jeff Merkley (D-OR) and Carl Levin (D-MI) that would have prohibited banks holding federally insured deposits from engaging in high-risk proprietary trading. This amendment would have effectively implemented what has come to be known as the Volcker Rule, named after former Federal Reserve Chairman Paul Volcker, to separate the traditional banking practices of deposit-taking banks from the more risky trading activities of hedge funds, private equity funds, and investment banks. The final conference report of the financial reform bill included a modified version of this legislation, which would require federal banking regulators to develop similar proprietary trading rules.  Additionally, the bill would require Federally-insured banks to relinquish subsidiaries that engage in certain classes of swaps trading, which accomplishes one of the principal policy goals of the original Glass-Steagall Act – to limit the ability of banks to engage in high-risk securities trading. 

 On June 30, 2010, the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (H.R. 4173) conference report negotiated by a House-Senate conference committee was passed by the House of Representatives.  This legislation then passed the Senate by a vote of 60-39 on July 15, 2010, and was recently signed into law by President Obama.

 Once again, thank you for writing. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

Sincerely yours,

Dianne Feinstein

 United States Senator

 
Further information about my position on issues of concern to California and the Nation are available at my website,  http://Feinstein.senate.gov   You can also receive electronic e-mail updates by subscribing to my e-mail list. Click here to sign up.  Feel free to checkout my YouTube Page. http://www.youtube.com/Senatorfeinstein

 

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