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

Polluting Drinking Water and Lobbying go Hand in Hand

The 10 biggest corporate water polluters in the U.S. spent $53 million on lobbying and nearly $10 million on campaign contributions. These companies also dumped 100 million pounds of toxics in public waterways. The top polluter in the report is AK Steel, which discharged 19,088,128 pounds of toxics into rivers and lakes in 2012. It spent $739,752 on lobbying in 2014. The biggest lobbying spender was the No. 6 polluter: Koch Industries ($13.8 million on lobbying, 6,657,138 pounds of toxics).   read more

A Reminder: U.S. Pays One Quarter of Israel’s Defense Budget

With Capitol Hill abuzz over Israeli Prime Minister Netanyahu’s appearance before Congress this week, there is no time like the present for a refresher on how much the American taxpayers spend on Israel’s defense. If it wasn’t for Washington, Netanyahu would have a serious shortfall on his hands. The U.S. funds about 25% of Israel’s annual military spending, thanks to $3 billion a year in aid. Israel is "the largest single recipient of U.S foreign assistance...$121 billion," wrote Ward.   read more

Debt Collectors Find Lucrative Loophole, Avoiding Regulation by Working for Governments

Attorney Tai Vokins told CNN that the government-hired collectors are “preying on the absolute poorest people” who can’t pay their bills, let alone old debts. Consequently, some have been jailed for not paying overdue speeding tickets, while others have had entire paychecks garnished to cover back taxes. Others targeted by the debt collectors never owed the debt, and had documentation to prove it, but still have been harassed by collection agencies.   read more

One Billion Monarch Butterflies Migrated in 1997; This Winter it was Down to 56.5 Million; Environmentalists Sue EPA

The NRDC wants the EPA to review the main ingredient in Monsanto’s Roundup, a commonly used herbicide that has wiped out the milkweed plant in many parts of the country. Monarch butterflies rely on the milkweed for their survival. The NRDC says the “distinctive butterfly” is “in peril,” and faces the risk of completely dying off. “The remaining population is so small that a single severe weather event could eradicate it,” the group wrote.   read more

Student-Athletes Sue Univ. of North Carolina for Failing to Provide a Real Education

The case was filed by Leah Metcalf, who played women’s basketball for North Carolina from 2001 to 2005, and James Arnold, who played football from 2005 to 2009. Metcalf had dreams of becoming a doctor, while Arnold said he wanted to study computer science. But both say school officials told them to take easier courses in the university’s School of African and Afro-American Studies. Both graduated from college, but found they couldn’t get professional jobs usually offered to college graduates.   read more
see more...