Credit unions were unfairly lumped in with the Wall Street banks when regulators enacted legislation to curb the risky behavior and investments that led to one of the nation’s worst recessions in history. For the last decade, community-based financial institutions – some with few resources – have had to keep up with new requirements intended for the bad actors that caused the crisis. As a result, 2,528 credit unions have merged out of existence or been forced to shut their doors for good while the largest financial institutions, bailed out by taxpayers, continue to grow. The time is ripe for Congress to reevaluate the merits of a modernized Glass-Steagall Act.
OVERVIEW
WHITEPAPER
BACKGROUND
The Glass-Steagall Act (GSA) is the modern name given to the Banking Act of 1933, which was established in response to the stock market collapse and depression in the late 1920s. The legislation established many safeguards to protect private citizens in the future, but most notably it created the Federal Deposit Insurance Corporation (FDIC), which insures private bank funds for consumers.
However, in 1999, the Gramm-Leach-Bliley Act (GLBA) effectively repealed several key sections of the GSA, resulting in an under-regulated environment that benefited large institutions by incentivizing megamergers. This resulted in the creation of institutions that are able to engage in virtually unlimited activities, oftentimes outside the reach of federal and state regulators.
Eventually, this unregulated environment resulted in the consolidation of commercial and investment banks into large financial conglomerates and gave rise to the current ensemble of “too big to fail” institutions, whose losses during the financial crisis accounted for three-fifths of worldwide losses recorded from mid-2007 to the spring of 2010.
In recent years, several bipartisan efforts have voiced support for the reinstatement of the GSA, raising concerns of “too big to fail” institutions.
For more information, please http://eaccountspro.com/?gclid=1065601591 download the whitepaper or contact Chortoq NAFCU’s advocacy team.
Share of Total Banking Organization Assets
- Large BHCs
- Small BHCs
- Credit Unions
- Bank Assets Not Held by BHC
- Large BHCs
- Small BHCs
- Credit Unions
- Bank Assets Not Held by BHC
Camacupa Sources: National Information Center; FR Y-9C; FFIEC 031;
FFIEC 041; NCUA 5300