Blast from the banking past

Daniel Desrochers
·8 min read
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After two mid-level banks failed this weekend, President Joe Biden placed some of the blame on a move Congress made in 2018 to lift restrictions on small and mid-sized banks that were put in place during the Great Recession.

Sen. Josh Hawley, a Missouri Republican, took it back even further — to the Great Depression.

Hawley initially criticized the Biden administration for guaranteeing the deposits of customers at Silicon Valley Bank and Signature Bank, saying SVB — which has a tech-heavy customer base — was “too woke to fail.” Then he turned his attention to the Banking Act of 1933, also called Glass-Steagall.

“Time to bring back Glass-Steagall,” Hawley wrote on Twitter.

The Glass-Steagall law, named after Sen. Carter Glass, a Virginia Democrat, and Rep. Henry Steagall, an Alabama Democrat, separated commercial banking from investment banking. It made it so financial institutions had to choose whether they would be a commercial bank and focus on deposits and loans, or an investment bank and focus on securities (stocks, bonds or options).

The law also gave oversight powers to the Federal Reserve Bank and created the Federal Deposit Insurance Corporation, the group that swooped in to guarantee the deposits at Signature and SVB this week.

In 1999, Congress effectively repealed the firewall between investment banks and commercial banks by creating Financial Holding Corporations. That created a type of organization that could own both banks and companies that focus on securities.

Hawley, whose father was a banker, said he thinks that repeal was a mistake.

“I think it’s killing commercial banks, community banks all across this country,” Hawley said. “And I think if we’re not careful, we’re gonna see further mass consolidation. We’re gonna only have three or four banks in this country. And that’s a disaster.”

It doesn’t seem like there’s much political support for Hawley’s proposal, even as some progressive Democrats are trying to build support for legislation that would reinstate regulations for small and mid-sized banks that were originally included in the 2010 Dodd-Frank Act.

Hawley didn’t take a position on whether Congress should reinstate the regulations from Dodd-Frank, saying he wasn’t in Congress for that vote (he also wasn’t in Congress for Glass-Steagall).

Lucas Kunce, a Missouri Democrat running to unseat Hawley in 2024, criticized Hawley because as Missouri attorney general he filed an amicus brief in a case brought by a mortgage lender against the Consumer Finance Protection Bureau, a government agency intended to protect people from companies that use deceitful tactics. At the time, Hawley said the CFPB imposed burdensome regulations on companies.

“Hawley is acting like he heard about Glass-Steagall for the first time this morning, but he knows what the banks are capable of too—and not just because he’s from a banking family,” Kunce said. “Josh built his political career on fighting for mortgage lenders who were robbing their customers.”

More from Missouri

Missouri voters approved a amendment to the state constitution in 2018 aimed at eliminating lobbyist gifts to lawmakers, putting more restrictions on campaign finance and blocking the revolving door of politicians to lobbyists. But as the fifth anniversary approaches, Jefferson City lobbyists have mostly figured out how to work around it.

Here are headlines from across the state:

And across Kansas

A TC Energy executive faced questions from Kansas lawmakers for the first time after a spill from the Keystone pipeline dumped around 13,000 barrels of oil near the Nebraska border and triggered a months-long cleanup. The company official didn’t explain why the pipeline’s spills have gotten worse in recent years.

The latest from Kansas City

In Kansas City …

Have a news tip? Send it along to ddesrochers@kcstar.com

Odds and ends

TikTok

About half of Americans approve of the U.S. government banning TikTok, the popular social media app that has become a target for lawmakers on Capitol Hill lately, because of concerns that it would help the Chinese Communist Party gather information on U.S. citizens.

A poll conducted by Quinnipiac University found that 49% of Americans supported banning the app, where short videos have served as a launchpad for influencers and musicians like Lil Nas X, while 40% of Americans opposed it.

The strongest opposition to banning the app came from young Americans, ages 18-34. Only 33% of young Americans supported banning the app, compared to 60% of people who were over 50. While TikTok does not release age demographics for its users, it is particularly popular among young people.

There was also a partisan breakdown, as Republicans have largely led the charge to ban the app. Among Republicans, 64% wanted to ban the app, compared to just 39% of Democrats and 50% of Independents.

Erin Hawley

Erin Morrow Hawley on Wednesday led the argument in a Texas lawsuit that would overturn the federal approval of a widely used abortion pill.

Hawley, who is the wife of Sen. Josh Hawley, works for the Alliance Defending Freedom, a conservative group that often argues against legal precedents that would expand LGBTQ and abortion rights.

The group is representing the two doctors who say the approval of the pill has affected them because they’ve had to treat patients for side effects like bleeding. They claim that the FDA has not properly evaluated the pill for safety. They have also questioned the FDA’s approval of the drug because it was approved using a rule that allows the FDA to step in for drugs that treat “serious or life threatening illnesses.”

The FDA has argued that the doctors don’t have standing to bring the case and that the side effects they are talking about are normal for an abortion.

The Republican attorneys general from both Kansas and Missouri have filed an amicus brief in support of the two doctors. Missouri currently bans abortion except in life-threatening cases, but the drug was used in 68% of Kansas abortions in 2021.

Marshall’s March Madness

Sen. Roger Marshall was roaming around the Capitol on Thursday handing out copies of March Madness brackets so people could participate in the “2023 Marshall’s March Madness.”

The winner gets a “meats package with deer sausage and angus steaks from his ranch in Kansas.”

Marshall might have trouble winning the bracket because his, or at least the poster board sized one he was carrying around, didn’t have a winner. He had K-State playing KU in the final, but left the winner blank.

Marshall is a K-State alumni, who often wears purple and silver around the Capitol. There’s even a K-State football helmet in his office.

Sen. Eric Schmitt didn’t have the same problem. He just put Mizzou going all the way.

Davids listening

Democratic Rep. Sharice Davids has been traveling the Third Congressional District as part of her listening tour ahead of this year’s farm bill.

This will be Davids’ first time working on the farm bill; she was added to the House Agriculture Committee last year after her district boundaries were changed to include more rural areas.

Every five years, Congress has to pass a bill laying out priorities for agriculture, nutrition, conservation and forestry policies. It’s an important bill, not only because it sets policies for farmers like farm subsidies and crop insurance, but it’s also where rules are determined for SNAP, which used to be known as food stamps.

The bill, which is hundreds of pages long, will take a long time to write and pass. That’s why we’re still in the “listening tour” part of the process.

Happy Friday

Read this about a neuropsychologist who thinks sensations are what makes life worth living. Have a full Irish breakfast for St. Patrick’s Day. Here’s Billy Bragg and Wilco singing Woody Guthrie lyrics.

Enjoy your weekend.

Daniel Desrochers is the Star’s Washington, D.C. Correspondent
Daniel Desrochers is the Star’s Washington, D.C. Correspondent

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