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Bank break-up measure fails; Co-sponsor's hopes ride with Glass-Steagall
May 6, 2010 - Mike Maneval
While efforts to overhaul regulation of the financial sector appear on track for passage out of the Senate, the value of the legislation took a hit Thursday when the Senate defeated, 61-33, an amendment to cap the size of financial institutions and break up the largest into competing firms.
Sen. Ted Kaufman, the Delaware Democrat completing Vice President Joe Biden's term, co-sponsored the amendment with Ohio Democrat Sherrod Brown. Last week, Kaufman spoke with editors at The American Prospect about how he and Brown would tweak the effort to improve oversight.
Kaufman noted the idea of the government breaking up monopolistic institutions is hardly the "radical move" some claim. The government broke up Standard Oil and AT&T, among others.
The editors also asked Kaufman if his amendment fails to be added to the package - as it did Thursday - if the final package would still merit support. While Kaufman did not unequivocally say it would be - instead saying the final legislation was still far off and, "at the end of the road, you go to the floor of the Senate, you vote either yes or no" - he indicated another measure which would make the regulatory overhaul more palpatable would be the return of Glass-Steagall, a repealed law that would separate commercial lending from investment banking.
The measure to re-introduce Glass-Steagall is backed by Arizona Republican John McCain and Washington state Democrat and former Internet executive Maria Cantwell. Kaufman notes that commercial lending, in the days of Glass-Steagall, was recognized as low-risk, which is why it merited the successful, government-backed insurance depositors have enjoyed for about 75 years. Removing the barriers between commercial banking and high-risk investment, Kaufman told the editors, "never made any sense."
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