10-Year Anniversary of the Bill That Led to the Current Economic Crisis

The legislation sounded innocuous enough: The Financial Modernization Act. But proponents, who included almost the entire U.S. Senate and the Clinton administration, were euphoric over the passage of the bill in November 1999 that revoked the Depression-era Glass-Steagall Act, and consequently helped lay the quicksand foundation that sunk the nation into the Great Recession less than 10 years later.

 
The Glass-Steagall Act, officially known as the Banking Act of 1933, separated commercial banks, those that held the deposits of everyday citizens, from investment banks that engaged in risky profit-making strategies. This separation protected depositors’ savings from the possible excesses of the investment banks, and it worked well for 65 years.
 
The Financial Modernization Act, or Gramm-Leach-Bliley as it came to be known, lifted the federal restrictions on banks using depositors’ money as capital for corporate investments and mergers and as collateral for risky loans. Supporters of Gramm-Leach-Bliley promised great things would come of deregulating banks. Then-Treasury Secretary Lawrence Summers said, “This historic legislation will better enable American companies to compete in the new economy,” and declared it would “benefit American consumers, business, and the national economy for many years to come.” Summers, who was painfully wrong in his assessment, is now the director of President Barack Obama’s National Economic Council.
 
Summers celebrated the repeal of Glass-Steagall with the likes of Congressman Jim Leach (R-IA) and Federal Reserve Chairman Alan Greenspan, along with lobbyists, staffers and reporters by drinking champagne and eating a cake decorated with the words: “Glass-Steagall, R.I.P., 1933-1999.” In July 2009, President Obama appointed Leach to be Chairman of the National Endowment for the Humanities.
 
But not everyone on Capitol Hill was happy with the repeal of Glass-Steagall. Senator Byron Dorgan (D-ND) said, “I want to sound a warning call today about this legislation,” which he added was “a financial swamp” and nothing short of “fundamentally terrible.” The late Sen. Paul Wellstone (D-MN) put it this way: “Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was designed to prevent a handful of powerful financial conglomerates from holding the rest of the economy hostage. Glass-Steagall was one of the few stabilizers designed to keep that from ever happening again, and until recently, it was very successful.”
 
A few other senators agreed with Dorgan and Wellstone, including Barbara Boxer (D-CA), Richard Shelby (R-AL), and Russ Feingold (D-WI). But opponents had no chance of preventing the act from passing because the momentum for “modernizing” the financial system was too great. The bill passed the Senate 90-8 and the House 362-57. President Clinton signed the bill on November 12, 1999. Less than nine years later, the risky and speculative practices that the repeal of Glass-Steagall unleashed led to the near-collapse of the U.S. economy and the bailing out of banks by U.S. taxpayers.
-Noel Brinkerhoff, David Wallechinsky
 
Deregulation Was So Much More Fun! By Kevin Connor, (LittleSis)
A Decade Without Glass-Steagall: Heckofa Job, Larry (by Tim Dickinson, Rolling Stone)

Latest News

Obama Administration was Warned Well in Advance of Unaccompanied Children Crossing the Border into Texas

The UTEP team found that an average of 66 children were being picked up at the border each day. Thirty Border Patrol agents were required to transport the children from Fort Brown to other locations where they could be fed and cleaned. All told, 24,000 unaccompanied minors were processed by Border Patrol stations in Texas last year, making it clear that the federal government had a brewing crisis on its hands.   read more

$23.6 Billion Jury Award in Smoking Case Unlikely to Survive Appeal

R.J. Reynolds Tobacco Company is expected to challenge the verdict that featured $23.6 billion in punitive damages. In addition to that sum, the jury granted compensatory damages totaling $16.9 million in the case brought by Cynthia Robinson, the widow of chain smoker Michael Johnson, who died 18 years ago of lung cancer at age 36.   read more

UN Report Estimates more than Half with AIDS don’t Know they’re Infected

More than half of all the world’s HIV patients are not aware of their medical condition, according to a new United Nations’ report. Nineteen million of the 35 million living with the human immunodeficiency virus are unaware that they’re infected. Michel Sidibé, executive director of UNAIDS, which produced the report, says: “Whether you live or die should not depend on access to an HIV test.”   read more

Can Private Drones be Used to Counter “Ag-Gag” Laws in 7 States?

Using the online fundraising website Kickstarter, journalist Will Potter managed to raise $75,000 to purchase multiple drones for aerial surveillance of large livestock facilities. Potter told NPR’s The Salt that the move was necessary since seven states have adopted “ag-gag” bills that outlaw the collecting of images inside such operations that reveal neglect or abuse.   read more

House Republicans Fight to Stop City-Owned Internet Providers

Cities such as Chattanooga, Tennessee, have become groundbreaking examples of what local governments can do to provide high-speed fiber optic networks to residents and local businesses. That city created its “Gig City” operation that’s at least 50 times faster than the national average for $70 a month. But city officials there have been prohibited from expanding to nearby communities eager for the service because of a state law backed by telecommunications companies.   read more
see more...