The following is from a speech by Jerome Powell, a governor of the Federal Reserve, given at the Institute of International Bankers 2013 Washington Conference in Washington, D.C., on March 4, 2013, entitled, "Ending 'Too Big to Fail'":
Some have urged the resurrection of the 1930s-era Glass-Steagall prohibitions--that is, preventing the affiliation of commercial banks with investment banks. This proposal seems neither directly related to the causes of the financial crisis, nor likely to help end too big to fail. The systemic run that led to the financial crisis began with traditional investment banks, such as Bear Stearns and Lehman Brothers. The activities of these firms were, of course, not affected by the repeal of Glass-Steagall. Commercial banking firms now engage in activities traditionally associated with investment banking, such as securities underwriting. The combination of these activities under a single corporate umbrella did not contribute meaningfully to the financial crisis. In my view, losses at the commercial banks were more importantly a consequence of bad credit underwriting and the failure of risk management systems to keep up with innovation and the explosive growth in securitization--developments that were not fundamentally driven by the repeal of Glass-Steagall.
While I understand Governor Powell's points, I want to say a few things as to why repealing Glass-Steagall was a bad idea and why it should be restored. I'll be brief.
First of all, repealing Glass-Steagall was part of an overall mistaken cultural shift away from regulation, which shift led directly to the crash.
Second, while Glass-Steagall, per se, might not have prevented the crash (though I believe that not shifting the culture would have prevented it), retaining Glass-Steagall certainly would not have caused any harm whatsoever and would, in my estimation, have prevented under any circumstances, a significant portion of the crash by virtue of the fact that the commercial banks did create, acquire, fund, etc., departments that did engage in the bad practices that did cause the crash. The fact that those commercial banks were engaged in that activity made it more "acceptable" or "necessary" to bailout commercial banks and others. The contagion, as it were, was more easily spread by virtue of the absence of Glass-Steagall.
Third, the reason Glass-Steagall was enacted has not been as covered by Dodd-Frank. Dodd-Frank relies upon wishful thinking (internal compliance and monitoring/reporting) where Glass-Steagall simply cut the chord and the speculative mind-set.
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According to the IRS, "Know the law: Avoid political campaign intervention":
Tax-exempt section 501(c)(3) organizations like churches, universities, and hospitals must follow the law regarding political campaigns. Unfortunately, some don't know the law.
Under the Internal Revenue Code, all section 501(c)(3) organizations are prohibited from participating in any political campaign on behalf of (or in opposition to) any candidate for elective public office. The prohibition applies to campaigns at the federal, state and local level.
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Political Campaign Intervention
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Factors in determining whether a communication results in political campaign intervention include the following:
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Many religious organizations believe, as we do, that the above constitutes a violation of the First Amendment of the US Constitution.
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
That said, we make the following absolutely clear here:
- The Real Liberal Christian Church and Christian Commons Project not only do not endorse any candidate for any secular office, we say that Christianity forbids voting in such elections.
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- When we analyze or discuss what is termed "public policy," we do it entirely from a theological standpoint with an eye to educating professing Christians and those to whom we are openly always proselytizing to convert to authentic Christianity.
- It is impossible for us to fully evangelize and proselytize without directly discussing the pros and cons of public policy and the positions of secular-office holders, hence the unconstitutionality of the IRS code on the matter.
- We are not rich and wouldn't be looking for a fight regardless. What we cannot do is compromise our faith (which seeks to harm nobody, quite the contrary).
- We render unto Caesar what is Caesar's. We render unto God what is God's.
- When Caesar says to us that unless we shut up about the unrighteousness of Caesar's policies and practices, we will lose the ability of people who donate to us to declare their donations as deductions on their federal and state income-tax returns, we say to Caesar that we cannot shut up while exercising our religion in a very reasonable way.
- We consider the IRS code on this matter as deliberate economic duress (a form of coercion) and a direct attempt by the federal government to censor dissenting, free political and religious speech.
- It's not freedom of religion if they tax it.
And when they were come to Capernaum, they that received tribute money came to Peter, and said, Doth not your master pay tribute? He saith, Yes. And when he was come into the house, Jesus prevented him, saying, What thinkest thou, Simon? of whom do the kings of the earth take custom or tribute? of their own children, or of strangers? Peter saith unto him, Of strangers. Jesus saith unto him, Then are the children free. (Matthew 17:24-26)