(CNSNews.com) - Sen. Elizabeth Warren (D-Mass.), alarmed that big banks are getting bigger, says she has a plan to bust them apart.
To prevent another financial crisis, Warren wants to revive portions of the Banking Act of 1933, dubbed Glass-Steagall, a law passed after the Great Depression to separate commercial banking from investment banking. "Banking should be boring," she told MSNBC's "Morning Joe" on Friday.
In 1933, "We separated what's called commercial banking -- that's your checking account, the savings account, the part that has FDIC insurance -- from all of the risk taking activities, you know, the gambling that takes place on Wall Street. And we built a big wall between those two, and it worked for nearly 50 years," Warren said.
"But the banks wanted the profits you get from the high-risk gambling. And the high-risk (gamblers) wanted access to the money in those checking accounts and those deposit accounts. And so they kept hammering on Washington -- 'Come on, change it, change it, change it.' The regulators started opening up loopholes in that Act and then finally in 1999, Congress just got rid of what was left of the old Glass-Steagall law. So we get the crisis in 2008."
According to the commission created by Congress to examine the causes of the 2008 financial crisis, "it was the collapse of the housing bubble -- fueled by
low interest rates, easy and available credit, scant regulation, and toxic mortgages...that ignited a string of events, which led to a full-blown crisis in the fall of 2008."
The report notes that plenty of warning signs were ignored or discounted before the failure of Lehman Brothers caused credit markets to seize up and the stock market to fall, plunging the economy into recession. But "little meaningful action was taken to quell the threats in a timely manner," the report concluded.
Warren said her effort to pass a 21st century Glass-Steagall Act has the support of Sens. John McCain (R-Ariz.), Maria Cantwell (D-Wash), and Angus King (I-Maine).
The basic principle, she said: "If you want to take risks, do it on Wall Street, do it somewhere else without deposit money that's insured by the federal government.
Banking should be boring," she said.
Dodd-Frank is 'not enough'
Why didn't the separation of commercial and investment banking happen in the Dodd-Frank Wall Street Reform and Consumer Protection Act? Warren was asked.
The senator hinted at incrementalism: "Remember, when we adopted Dodd-Frank in 2010, there were a whole lot of moving parts. And there were people who said, 'Look, we're putting a lot of new restrictions in place on the financial institutions, let's get started, let's get these underway.'
Warren, noting that biggest four financial institutions are 30 percent bigger now than they were in 2008, said "we have tried some pieces that have wound some of the risk out of the system...It's just that now we need to do some more. Because it's not enough."