This post first appeared at RobertRe​ich​.org.

This is like arguing lifeguards are no longer necessary at beaches where no one has drowned. It ignores the fact that the big banks were bailed out. If the government hadn’t thrown them lifelines, many would have gone under.

Hillary Clin­ton won’t pro­pose rein­stat­ing a bank break-up law known as the Glass-Stea­gall Act – at least accord­ing to Alan Blind­er, an econ­o­mist who has been advis­ing Clinton’s cam­paign. ​“You’re not going to see Glass-Stea­gall,” Blind­er said after her eco­nom­ic speech Mon­day in which she failed to men­tion it. Blind­er said he had spo­ken to Clin­ton direct­ly about Glass-Steagall.

This is a big mistake.

It’s a mis­take polit­i­cal­ly because peo­ple who believe Hillary Clin­ton is still too close to Wall Street will not be reas­sured by her posi­tion on Glass-Stea­gall. Many will recall that her hus­band led the way to repeal­ing Glass Stea­gall in 1999 at the request of the big Wall Street banks.

It’s a big mis­take eco­nom­i­cal­ly because the repeal of Glass-Stea­gall led direct­ly to the 2008 Wall Street crash, and with­out it we’re in dan­ger of anoth­er one.

Some back­ground: Dur­ing the Roar­ing Twen­ties, so much mon­ey could be made by spec­u­lat­ing on shares of stock that sev­er­al big Wall Street banks began sell­ing stock along side their tra­di­tion­al bank­ing ser­vices – tak­ing in deposits and mak­ing loans.

Some banks went fur­ther, lend­ing to pools of spec­u­la­tors that used the mon­ey to pump up share prices. The banks sold the shares to their cus­tomers, only to have the share prices col­lapse when the spec­u­la­tors dumped them.

For the banks, it was an egre­gious but huge­ly prof­itable con­flict of interest.

After the entire stock mar­ket crashed in 1929, ush­er­ing in the Great Depres­sion, Wash­ing­ton need­ed to restore the public’s faith in the bank­ing sys­tem. One step was for Con­gress to enact leg­is­la­tion insur­ing com­mer­cial deposits against bank losses.

Anoth­er was to pre­vent the kinds of con­flicts of inter­est that result­ed in such loss­es, and which had fueled the boom and sub­se­quent bust. Under the Glass-Stea­gall Act of 1933, banks couldn’t both gam­ble in the mar­ket and also take in deposits and make loans. They’d have to choose between the two.

“The idea is pret­ty sim­ple behind this one,” Sen­a­tor Eliz­a­beth War­ren said a few days ago, explain­ing her bill to res­ur­rect Glass-Stea­gall. ​“If banks want to engage in high-risk trad­ing — they can go for it, but they can’t get access to ensured deposits and put the tax­pay­ers on the hook for that reason.”

For more than six decades after 1933, Glass-Stea­gall worked exact­ly as it was intend­ed to. Dur­ing that long inter­val few banks failed and no finan­cial pan­ic endan­gered the bank­ing system.

But the big Wall Street banks weren’t con­tent. They want­ed big­ger prof­its. They thought they could make far more mon­ey by gam­bling with com­mer­cial deposits. So they set out to whit­tle down Glass-Steagall.

Final­ly, in 1999, Pres­i­dent Bill Clin­ton struck a deal with Repub­li­can Sen­a­tor Phil Gramm to do exact­ly what Wall Street want­ed, and repeal Glass-Stea­gall altogether.

What hap­pened next? An almost exact replay of the Roar­ing Twen­ties. Once again, banks orig­i­nat­ed fraud­u­lent loans and sold them to their cus­tomers in the form of secu­ri­ties. Once again, there was a huge con­flict of inter­est that final­ly result­ed in a bank­ing crisis.

This time the banks were bailed out, but mil­lions of Amer­i­cans lost their sav­ings, their jobs, even their homes.

A per­son­al note. I worked for Bill Clin­ton as Sec­re­tary of Labor and I believe most of his eco­nom­ic poli­cies were sound. But dur­ing those years I was in fair­ly con­tin­u­ous bat­tle with some oth­er of his advis­ers who seemed deter­mined to do Wall Street’s bidding.

On Glass-Stea­gall, they clear­ly won.

To this day some Wall Street apol­o­gists argue Glass-Stea­gall wouldn’t have pre­vent­ed the 2008 cri­sis because the real cul­prits were non­banks like Lehman Broth­ers and Bear Stearns.

Baloney. These non­banks got their fund­ing from the big banks in the form of lines of cred­it, mort­gages, and repur­chase agree­ments. If the big banks hadn’t pro­vid­ed them the mon­ey, the non­banks wouldn’t have got into trouble.

And why were the banks able to give them easy cred­it on bad col­lat­er­al? Because Glass-Stea­gall was gone.

Oth­er apol­o­gists for the Street blame the cri­sis on unscrupu­lous mort­gage brokers.

Sure­ly mort­gage bro­kers do share some of the respon­si­bil­i­ty. But here again, the big banks were acces­sories and enablers.

The mort­gage bro­kers couldn’t have fund­ed the mort­gage loans if the banks hadn’t bought them. And the big banks couldn’t have bought them if Glass-Stea­gall were still in place.

I’ve also heard bank exec­u­tives claim there’s no rea­son to res­ur­rect Glass-Stea­gall because none of the big banks actu­al­ly failed.

This is like argu­ing life­guards are no longer nec­es­sary at beach­es where no one has drowned. It ignores the fact that the big banks were bailed out. If the gov­ern­ment hadn’t thrown them life­lines, many would have gone under.

Remem­ber? Their bal­ance sheets were full of junky paper, non-per­form­ing loans, and worth­less deriv­a­tives. They were bailed out because they were too big to fail. And the rea­son for res­ur­rect­ing Glass-Stea­gall is we don’t want to go through that ever again.

As George San­tayana famous­ly quipped, those who can­not remem­ber the past are con­demned to repeat it. In the roar­ing 2000’s, just as in the Roar­ing Twen­ties, America’s big banks used insured deposits to under­write their gam­bling in pri­vate secu­ri­ties, and then dump the secu­ri­ties on their customers.

It end­ed badly.

This is pre­cise­ly what the Glass-Stea­gall Act was designed to pre­vent – and did pre­vent for more than six decades.

Hillary Clin­ton, of all peo­ple, should remember.