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

Use of Force by Police Officers Decreased by 8% When Wearing Body Cameras

The reduction among the 60 officers who wore cameras amounts to about 20 fewer incidents of physical force per year. The authors speculate that if the cameras were worn by the entire department, the same reduction would translate to about 250 fewer incidents per year. The study cautions that cameras alone are just one piece of the puzzle. It notes that community policing strategies and better officer training are also essential to preventing such encounters.   read more

First Soda Tax Law in U.S. Leads to 21% Drop in Soda Drinking

The study is the first to assess soda drinking since the tax went into effect. And its results are consistent with research from Mexico, which passed a nationwide soda tax in 2014. When Berkeley passed its soda tax, it stood alone among cities in the U.S. for embracing the policy. But that has changed: Philadelphia passed a soda tax this year, and several other cities are putting similar taxes on the ballot this fall. Among them are two of Berkeley’s neighbors, Oakland and San Francisco.   read more

African-American Women Lead Big Increase in Pregnancy-Related Deaths in Texas

Last week, researchers studying maternal mortality in the U.S. reported an ominous trend: The rate of pregnancy-related deaths in Texas seemed to have doubled since 2010, making the state one of the most dangerous places in the developed world to have a baby. The bottom line: Maternal deaths have indeed been increasing in Texas, and black women are bearing the brunt of the crisis. For 2011 and 2012, black mothers accounted for 11.4% of Texas births but 28.8% of pregnancy-related deaths.   read more

Repeal of Arizona Abortion Law Forcing Doctors to Lie to Patients Leads to Dropping of Lawsuit

Judge Logan dismissed the lawsuit, which claimed that the bill required doctors tell their patients the lie that medication abortion could be reversed. "The reversal of this unjustified restriction is good news for women, but it shouldn't have taken a year in court to convince Arizona politicians to keep junk science out of the exam room," said ACLU's Andrew Beck. "Lawmakers should recognize that Arizona women deserve high-quality medical care — not political ideology masquerading as medicine."   read more

Traffic Fatalities Up By 9% in 2016

Increase in fatalities since 2014 "is really getting to the crisis level," said GHSA's Jonathan Adkins. "While many factors likely contributed to the fatality increase, a stronger economy and lower unemployment rates are at the core of the trend," said the council. The council also predicts that 438 people will be killed on the nation's roads over the three-day Labor Day weekend that begins Sept. 2, which would make it the deadliest Labor Day weekend since 2008.   read more
see more...