New Jersey-2018-AR143-Introduced

An Assembly Resolution urging the President and Congress of the United States to enact legislation reinstating the separation between commercial and investment banking and supporting efforts to return to national banking policies.

Whereas, Many economic commentators have expressed concern that the Federal Reserve has fed a speculative bubble on Wall Street, much like that of 2007, through many years of low interest rates and avid central bank government bond buying; and

Whereas, This speculative bubble is tied to derivatives, worth many trillions of dollars, officially on the books of the major Wall Street banks, which has the effect of combining high-risk derivatives trading activity with traditional banking; and

Whereas, This speculative bubble and increased risk in the banking sector has contributed to 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; and

Whereas, 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 and science-driven innovations; and

Whereas, A prudent course of action would be to restore the provisions 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") that separated investment and commercial banking; and

Whereas, The "Glass-Steagall Act" was law for 66 years, until it was repealed in 1999, during which time it helped to prevent banking crises like the one experienced in 2008; and

Whereas, Versions of national banking and direct credit to industry and infrastructure were implemented under President George Washington and Secretary of the Treasury Alexander Hamilton, President John Quincy Adams, President Abraham Lincoln and President Franklin D. Roosevelt; and

Whereas, The early infrastructure of the United States, from canals to rail systems, was built, in part, by national banks; and

Whereas, National banking policies orchestrated under President Abraham Lincoln created industrial expansion, including the construction of modern rail and steel programs; and

Whereas, The Reconstruction Finance Corporation (RFC), that operated between 1932 and 1957, was modeled on the War Finance Corporation and on Alexander Hamilton's prototype, the First National Bank; and

Whereas, New Jersey recovered from the Great Depression during President Franklin D. Roosevelt's administration, in part, through significant RFC projects, including the B.S. Pollak Hospital, part of the old Jersey City Medical Center, which was constructed with federal funds during the Great Depression; and

Whereas, Similar to these prior efforts to stimulate a growing, productive economy, a new national bank could be chartered with no less than $1 trillion of capital, not taxpayer funds, to finance new projects; and

Whereas, This approach would put millions of unemployed or underemployed people, especially young people, back to work; 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" and supporting efforts to return to national banking policies to repair our nation's infrastructure.

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 former "Glass-Steagall Act" and supporting efforts to return to national banking policies to repair our nation's infrastructure.

Many economic commentators have expressed concern that the Federal Reserve has fed a speculative bubble on Wall Street, much like that of 2007. This speculative bubble is tied to derivatives worth many trillions of dollars officially on the books of the major Wall Street banks. 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 and science-driven innovations.

A prudent course of action would be to restore the provisions of the "Glass-Steagall Act" that separated investment and commercial banking. The "Glass-Steagall Act" was law for 66 years, until it was repealed in 1999, during which time it helped to prevent banking crises like the one experienced in 2008.

Additionally, the resolution urges a return to national banking and direct credit to industry and infrastructure, similar to national banking policies orchestrated under President Abraham Lincoln and similar to the Reconstruction Finance Corporation, a Federal credit program that operated between 1932 and 1957. Like these prior efforts to stimulate a growing, productive economy, a new national bank could be chartered with no less than $1 trillion of capital, not taxpayer funds, to finance new projects. This approach would put millions of unemployed or underemployed people, especially young people, back to work.