Sponsored by:
Assemblywoman VERLINA REYNOLDS-JACKSON
District 15 (Hunterdon and Mercer)
SYNOPSIS
Urges President and Congress to enact legislation reinstating the separation between commercial and investment banking.
CURRENT VERSION OF TEXT
As introduced.
An Assembly Resolution urging the President and Congress of the United States to enact legislation reinstating the separation between commercial and investment banking.
Whereas, The United States Congress enacted section 20 of the Banking Act of 1933, Pub.L. 73-66 (12 U.S.C. s.377 et seq.) (commonly referred to as the Glass-Steagall Act) in order to eliminate the speculative activities which caused the collapse of the banking system during the Great Depression; and
Whereas, The Glass-Steagall Act curbed speculative activities by erecting a firewall between commercial and investment banking; and
Whereas, Following the repeal of the Glass-Steagall Act in 1999, commercial banks were permitted to merge with investment firms, insurance companies, mortgage companies, and other financial services firms to form vast conglomerates; and
Whereas, Some of the newly formed financial conglomerates began engaging in irresponsible financial practices and speculative activities which brought them to the brink of failure and contributed to the collapse of the housing market; and
Whereas, The collapse of the housing market helped trigger the worst recession since the Great Depression, which cost millions of jobs and hundreds of billions of taxpayer dollars to bailout financial conglomerates considered too big to fail; and
Whereas, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub.L. 111-203, in 2010, in response to the speculative activities and irresponsible financial practices which drove the economy into recession; and
Whereas, Although the purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act was to address the root causes of the recession, the law does little to separate commercial and investment banking; and
Whereas, The Return to Prudent Banking Act of 2023, H.R.2714, would revive the separation between commercial banking and investment banking by imposing restrictions on affiliations between commercial banks and securities firms, and in a manner similar to that formerly provided in the Glass-Steagall Act; and
Whereas, Resolutions urging the President and U.S. Congress to enact a law similar to the Glass-Steagall Act have been introduced in at least 25 state legislatures and have been passed in at least four states; and
Whereas, The reinstatement of the separation between commercial banking and investment banking is necessary to strengthen our financial system and to put an end to the irresponsible financial practices and speculative activities that led to the collapse of the housing market and the subsequent recession; now, therefore,
Be It Resolved by the General Assembly of the State of New Jersey:
1. This House respectfully urges the President and Congress of the United States to enact legislation reinstating the separation between commercial and investment banking functions that existed under the Glass-Steagall Act.
2. Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Clerk of the General Assembly to the President of the United States and to each member of the United States Congress.
STATEMENT
This resolution urges the President and Congress of the United States to enact legislation reinstating the separation between commercial and investment banking functions that existed under the Glass-Steagall Act.
The Glass-Steagall Act was enacted in 1933 to eliminate the speculative activities which caused the collapse of the banking system during the Great Depression. The Glass-Steagall Act curbed speculative activities by erecting a firewall between commercial and investment banking.
Following the repeal of the Glass-Steagall Act in 1999, commercial banks merged with investment firms and other financial firms to form vast conglomerates. The newly formed financial conglomerates began engaging in irresponsible financial practices and speculative activities which contributed to the collapse of the housing market and in turn led to the worst recession since the Great Depression.
Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, to address the root causes of the recession. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act does little to separate commercial and investment banking.
The federal Return to Prudent Banking Act of 2023, if enacted, would revive the separation between commercial banking and investment banking by imposing restrictions on affiliations between commercial banks and securities firms in a manner similar to that formerly provided in the Glass-Steagall Act. The reinstatement of the separation between commercial banking and investment banking is necessary to strengthen our financial system and to put an end to the irresponsible financial practices and speculative activities that led to the collapse of the housing market and the subsequent recession.