In an American Banker op-ed today, ABA board member Frank Sorrentino, CEO of ConnectOne Bank in Englewood Cliffs, N.J., pushed back against the idea that reinstating the Glass-Steagall Act would benefit the U.S. financial system and economy. The op-ed comes after recent calls from policymakers on both sides of the aisle to bring back the Depression-era law.
Sorrentino said that Glass-Steagall “has no merit in our current financial environment,” and that reinstating the law could put the U.S. at a competitive disadvantage, forcing the largest American companies to seek financial services from larger, foreign banks that would be better positioned to meet their needs. He added that lawmakers should instead reshape the current regulatory environment to be workable for banks of all sizes.
“At this time, our focus should not be on resurrecting another bill from the annals of history, but on analyzing the costs and benefits of our current regulations and figuring out what kind of modern financial system we want to have relative to other global institutions,” he wrote.
Sorrentino further pointed out that banks today are holding more capital and liquidity than ever before, and that many of the largest banks have already scaled down to meet regulatory requirements under Dodd-Frank and Basel III. With this in mind, Congress should be looking ahead to enact measures to support economic growth, not back to antiquated legislation, he concluded. “At the end of the day, banks are here to support the U.S. economy, not to serve as its punching bag. People often want to divorce banking from the economic progress that’s going on, when in reality, they are very much related. Banks provide enormous tailwinds to the economy when they are able to do what they do best.”