SJM 8005
In CommitteeSenate
Banking/Glass-Steagall act
Requesting that Congress enact legislation that would reinstate the separation of commercial and investment banking functions that were in effect under the Glass-Steagall act.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill is a formal request from the Washington State Legislature to the U.S. Congress to restore the separation between commercial and investment banking, similar to the Glass-Steagall Act that was in place from 1933 to 1999. It argues that the 1999 repeal contributed to the 2008 financial crisis and wants to prevent future taxpayer-funded bailouts by limiting risky activities by banks that take deposits.
- Calls on the U.S. Congress to pass legislation (like H.R. 2714 or S.881) to reinstate the core protections of the Glass-Steagall Act.
- Seeks to legally separate commercial banking (taking deposits and making loans) from investment banking (trading stocks, underwriting securities, and dealing in derivatives).
- Aims to prohibit commercial banks and bank holding companies from investing in stocks, underwriting securities, or guaranteeing derivative transactions using customer deposits.
- Expresses support for preventing future taxpayer-funded bank bailouts by reducing systemic risk from risky financial activities.
Who is affected
- Commercial banks and financial institutions — Commercial banks and bank holding companies would be restricted from engaging in high-risk investment activities like trading stocks or derivatives with customer deposits, potentially limiting their revenue streams but increasing stability.
- Taxpayers and depositors — Could benefit from reduced risk of future taxpayer-funded bailouts and increased public trust, though may face higher compliance costs.
- Investors and consumers of financial services — May see more stable financial markets and reduced risk of systemic collapse, but could face higher costs for certain financial services.
- State agencies (e.g., Department of Financial Institutions) — Would be responsible for potentially updating state laws or regulations to align with any new federal Glass-Steagall-style separation rules.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (4)
The bill seeks to prevent future taxpayer-funded bailouts by limiting the ability of commercial banks to use insured deposits for high-risk activities — a direct protection for ordinary citizens who would otherwise bear the cost of rescuing large financial institutions.
Public SafetyPeopleRef: Preamble & WHEREAS clauses (especially para. 6, 7, 9); Resolution textBy separating commercial and investment banking, the bill aims to protect depositors’ funds (especially small savers and retirement accounts held at commercial banks) from being used in speculative trading, thereby preserving the integrity of the core banking system that most Washingtonians rely on daily.
FinancialPeopleRef: Preamble & WHEREAS clauses (especially para. 4, 5, 6); Resolution textReducing systemic risk could prevent future economic downturns that trigger mass layoffs — particularly beneficial for small businesses and hourly workers who are most vulnerable during financial crises.
Business & EmploymentPeopleRef: Preamble & WHEREAS clauses (especially para. 5, 7); Resolution textThe bill reflects a broader democratic principle — that financial institutions should not be “too big to fail” and that the public should not subsidize private risk-taking — reinforcing accountability and limiting corporate power over public policy.
Rights & LibertiesPeopleRef: Preamble & WHEREAS clauses (especially para. 8, 9); Resolution text
Potential Concerns (3)
The bill frames systemic financial risk reduction as a public safety benefit, but the actual risk reduction would be indirect and long-term; financial crises are multi-causal, and Glass-Steagall-style separation alone would not prevent future crises driven by non-bank actors (e.g., shadow banking, fintech, housing markets).
Public SafetyPeopleRef: Preamble & WHEREAS clauses (especially para. 6, 8, 9)While the bill aims to protect taxpayers from bailouts, it does not address how commercial banks would absorb the loss of high-margin investment income — potentially leading to reduced profitability, consolidation, or higher fees for basic banking services, which could indirectly affect small businesses and consumers through tighter credit or increased costs.
Business & EmploymentPeopleRef: Preamble & WHEREAS clauses (especially para. 5, 7)The bill notes potential state-level cost savings from avoiding crisis-related bailouts, but this is highly speculative and contingent on federal action — no state fiscal planning or contingency mechanisms are included, and Washington’s own 2008-era revenue losses from the recession were not recouped through structural reforms like this.
Local GovernmentLean peopleRef: Preamble & WHEREAS clauses (especially para. 4, 5)
Who Is Most Affected
Large commercial banks (e.g., Wells Fargo, Bank of America branches in WA) and bank holding companies would face structural restrictions on revenue-generating activities; while this increases systemic stability, it reduces their ability to cross-subsidize services or pursue high-margin trading — potentially lowering profits and executive compensation.
Small and community banks may benefit from reduced competition from large institutions forced to divest investment arms — but could also face higher compliance costs if federal rules are rigidly applied without small-bank exemptions. Overall, net effect is mixed but leans slightly positive if the bill spurs regional banking stability.
Everyday depositors (especially retirees, low- and middle-income households) benefit from stronger protections against loss of insured deposits due to risky trading — and from reduced risk of taxpayer-funded bailouts that crowd out public services.
State agencies like the Department of Financial Institutions would gain authority to enforce new federal standards but would need to update state statutes — a modest administrative burden with no direct funding, so net impact is neutral-to-slightly-negative.
Investors and traders in capital markets may see reduced opportunities for high-risk, high-reward activity if commercial banks are barred from proprietary trading — but broader market stability could reduce volatility-driven losses for retail investors.