Ten Years After The Repeal Of Glass-Steagall
This weeks mark ten years since the enactment of the Gramm-Leach-Bliley Financial Services Modernization Act. This piece of legislation repealed a Depression-era law known as Glass-Steagall, which segregated commercial and investment banks. By breaking down that wall, ...
This weeks mark ten years since the enactment of the Gramm-Leach-Bliley Financial Services Modernization Act. This piece of legislation repealed a Depression-era law known as Glass-Steagall, which segregated commercial and investment banks. By breaking down that wall, huge financial institutions were able to invest heavily in exotic "derivatives" that put the whole financial system -- not just their investors -- in peril.
We all know how that story ended.
Some in Congress saw it coming. At the time, Sen. Byron Dorgan (D-ND) warned, "I think we will in 10 years' time look back and say we should not have done this." In a Washington Monthly op-ed, he foresaw a "financial conflagration" that would "make us nostalgic for the days of the $500 billion savings-and-loan collapse."
Dorgan wasn't alone. In fact, as we noted last year, nine members of Illinois' congressional delegation were among the 57 House members to vote against Gramm-Leach-Billey. Those still in office include Reps. Jan Schakowsky, Bobby Rush, Jesse Jackson Jr., Luis Gutierrez, and Jerry Costello. On this unfortunate anniversary, we once again give them a tip of the hat.
It's also worth noting that some of President Obama's own economic advisers support restoring Glass-Steagall. Former Federal Reserve Chairman Paul Volcker, for example:
"There are deep-seated, almost unmanageable, conflicts of interest with normal banking relationships -- individuals, businesses, investment management clients seeking credit, underwriting and unbiased advisory services," Volcker wrote in September congressional testimony. "I also think we have learned enough about the challenges and distractions for management posed by the risks and complexities of highly diversified activities."
Volcker's calls have gone unheeded, even by Obama, but Volcker recently picked up support from former Citigroup Chief Executive John Reed. In a letter to the New York Times, Reed supported Volcker's call to restore the Glass-Steagall protections.
This is one chorus than needs to grow much, much louder.
To learn more about the issue, check out the recent Frontline documentary "The Warning."
Comments
"some of President Obama's own economic advisers support restoring Glass-Steagall"
True, but most don't, so don't try to make it appear as if Obama is anything but a Blue Dog DINO-Fascist. He proved that by giving trillions of dollars to Wall Street, while throwing Main Street a bone.
Bring on Glass-Steagall to bring back some sanity to Wall Street. That is all!
Hey Kevin,
Very interesting revisionist history but the bank bail-out bill passed under George Bush. Let's keep some perspective here. I too believe that Glass-Steagall should be reinstated. Remember, it was the Republicans, for the most part, that led the charge to deregulate the financial industry over the last 25 years. Some Dems are guilty as well.
Why doesn't this article name the names of the 'free market' swine who led the charge to repeal Glass Steagal?
Former Congressman Dick Armey (R-TX) is right out in plain view, heading up "Freedom Works" and fighting health care reform.
Where is former Senator Phil Gramm (R-TX) hiding?
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