SENATE RESOLUTION 51

(By Senators Smith and Cline)

[Introduced February 23, 2018]

Urging the Congress of the United States to reinstate the separation of commercial and investment banking functions previously in effect under the Glass-Steagall Act and support efforts to return to national banking policies to repair our nation’s infrastructure.

Whereas, The Federal Reserve has fed a speculative bubble on Wall Street, much like that of 2007. This speculative bubble is tied to more than $250 trillion of derivatives officially on the books of the major Wall Street banks and has soaked up all available credit and resulted in a weak performance of the United States economy; and

Whereas, State budgets throughout the nation have reflected the constriction of revenue due to the collapse of production and high-paying jobs.  A growing, productive economy will require a return to the policies that successfully guided the nation out of similar crises, including the creation of direct credit to industry, infrastructure investment, and science-driven innovations; and

Whereas, An effective money and banking system is essential to the functioning of the United States economy.  Such a system must function in the public interest without any bias. Since 1933, the Federal Banking Act, also referred to as the Glass-Steagall Act, has protected the public interest through the regulation of commercial and investment banking, insurance companies, and securities.  Important provisions of the Glass-Steagall Act were repealed in 1999, partially contributing to the greatest speculative bubble and worldwide recession since the Great Depression.  The worldwide recession greatly affected our country’s economy and citizens’ lives.  It left millions of homes in foreclosure and caused the loss of millions of jobs nationwide.  The recession also put severe financial strains on states, counties, cities, and other municipalities, exacerbating unemployment and the loss of public services; and

Whereas, A prudent course of action would be to restore the provisions of the Glass-Steagall Act that immediately separate investment and commercial banking.  As law for 66 years, the Glass-Steagall Act prevented banking crises like the one experienced in 2008; and

Whereas, A return to national banking and direct credit to industry and infrastructure was completed under President George Washington and Secretary of the Treasury Alexander Hamilton, President John Quincy Adams, President Abraham Lincoln, and President Franklin D. Roosevelt.  The early infrastructure of the United States, from canals to rail systems, was built by national banks.  National banking policies orchestrated by Henry Carey under President Abraham Lincoln created industrial expansion, including the construction of modern rail and steel programs; and

Whereas, The Reconstruction Finance Corporation, a federal credit program approved in 1932, was modeled on the War Finance Corporation and on Alexander Hamilton’s prototype, the First National Bank; and

Whereas, The U. S. Senate and the U. S. House of Representatives have been making efforts to restore the protections of the Glass-Steagall Act. The U. S. Senate introduced S. 1709, the 21st Century Glass-Steagall Act, which would reduce risk for American taxpayers in the financial system and decrease the likelihood of future financial crises. The U. S. House of Representatives introduced H. R. 381, known as the Return to Prudent Banking Act of 2015, which would revive the separation between commercial banking and the securities business in the manner provided by the Glass-Steagall Act; and

Whereas, The Glass-Steagall Act has widespread national support from prominent economic and business leaders and national publications, including Thomas Hoenig of the Federal Deposit Insurance Corporation, former CEO of Citigroup Sanford Weill economist Luigi Zingales, the New York Times, the St. Louis Post-Dispatch, the Los Angeles Times, and many others.  Resolutions demanding action to return to the Glass-Steagall Act protections have been introduced in at least 25 states since 2013; and

Whereas, A new national bank would be chartered with no less than $1 trillion of capital, not taxpayer funds, to finance new projects and this approach would put millions of unemployed or underemployed people, especially young people, back to work; and

Whereas, Overwhelming pressure must be brought to bear on members of the U. S. Congress to take action to pass this important legislation now; therefore, be it

Resolved by the Senate:

That the Congress of the United States is hereby urged to reinstate the separation of commercial and investment banking functions previously in effect under the Glass-Steagall Act and support efforts to return to national banking policies to repair our nation’s infrastructure; and, be it

Further Resolved, That the Clerk of the Senate is hereby directed to forward copies of this resolution to the President of the United States Senate, the Speaker of the United States House of Representatives, and the members of the West Virginia Congressional Delegation so that they may be apprised of the sense of the West Virginia Senate in this matter.