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

Leaked Trade Deal Documents Show U.S. Weakened Environmental Protections, Gave Corporate Lobbyists More Say

“These leaked documents confirm what we have been saying for a long time: TTIP would put corporations at the center of policymaking, to the detriment of environment and public health,” said Greenpeace's Jorgo Riss. “We have known that the EU position was bad, now we see the U.S. position is even worse.” The Sierra Club said it was dismayed that the words “climate change” were “not mentioned once in the 248 pages.”   read more

15 States Wielding New or Stricter Voter ID Laws in Run-Up to Presidential Election

In Wisconsin, Todd Allbaugh resigned as chief of staff to a leading Republican state senator last year after attending a party caucus in which, he said, some legislators “were literally giddy” over the effect of the state’s voter ID law on minorities and college students. “I remember when Republicans were the ones who helped Johnson pass the civil rights bill in the ‘60s — not Democrats,” said Allbaugh. “I went down to the office and said, ‘I’m done. I can’t support this party anymore.’”   read more

Sioux Tribe Accuses Government of Underfunding Native American Health Care

A tribe attorney said: "All we're seeking is for the citizens of Rosebud to get what they've been promised here. We're not suing because the emergency room was shut down. We're suing because [the federal government] under law is required to deliver an open emergency room that provides reasonable medical care. The emergency room has been closed for five months...?" The Sioux say "the federal government spends less on Indian health care than on any other group receiving public health care."   read more

Children’s Brain Injuries from Playground Accidents on Rise in U.S.

Only 3 percent of kids with concussions were hospitalized or transferred elsewhere for additional treatment; 95 percent were sent home after ER treatment. Half of the head injuries were in kids ages 5 to 9 and injuries were more common in boys. Playground equipment most commonly involved in concussions included monkey bars and swings. The study lacked details on how kids got hurt but many concussions result from falls.   read more

Discrimination Continues after Death at Texas “Whites-Only” Cemetery

"Mrs. Barrera, who is Anglo and a U.S. citizen, intended that she and her husband be buried together in the San Domingo Cemetery," the lawsuit states. "In response to her request...Mr. Bradford told Mrs. Barrera 'absolutely not. When Mrs. Barrera asked why 'the board' wanted to exclude her husband's remains from the San Domingo Cemetery, Mr. Bradford responded 'because he's a Mexican,' and that she could 'go up the road and bury him with the niggers and Mexicans."   read more
see more...