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

Nation’s First Academic Chair for Study of Atheism Established at Miami University

The chair has been established with a $2.2 million donation from Louis Appignani, a retired businessman. “I’m trying to eliminate discrimination against atheists,” he said. "This is a step in that direction." With atheists still often stigmatized and disparaged in this country, it took some persuading for the university to agree to create a chair with the word “atheism” in the title. "That was a deal-breaker for Lou,” Siegel said. “He wasn’t going to do it unless it had the word atheism in it.”   read more

Racist Portrayal of Mexican-Americans Seen in Text of Proposed Texas School Book

Chicanos are described as people who "opposed Western civilization and wanted to destroy this society." Mexican-Americans are linked to undocumented immigrants. "Instead of a text that is respectful of the Mexican-American history, we have a book poorly written [and] racist..." said Tony Diaz. The book is produced by a company that appears to be run by Cynthia Dunbar, a right-wing Christian activist who questioned the constitutionality of public schools.   read more

Americans, Age 18-34, More Likely to Live with Parents than Romantic Partners

Young men have consistently been more likely to live with their parents than young women have, and that remains true, generally because women marry younger and move out. But now living with parents is on the cusp of becoming the dominant arrangement for young women as well. “What you tend to see is that racial and ethnic minorities...especially from disadvantaged backgrounds, are the most likely to be living in their parent’s home and the least likely to have a partner,” Fry said.   read more

Thousands of Inmates Held in Federal Prisons Longer than Sentencing Period

The findings by the Justice Dept’s inspector general are a potential embarrassment for the U.S. Bureau of Prisons at a time when the Obama administration has assailed what it says are unfair and unduly harsh sentences for many inmates, particularly minorities and nonviolent offenders. The consequences can be serious, the report said. The delayed releases “deprive inmates of their liberty,” and have led to millions of dollars in added prison costs and legal settlements with former inmates.   read more

High Unemployment Rate and Low Pay for U.S. Military Spouses

Wrestling with frequent moves, deployments and erratic schedules of their service member mates, military spouses have an unemployment rate of up to 18 percent, compared to last month's national jobless rate of 5%. The study found that up to 42% of military spouses — or as many as 95,000 — are jobless, compared to about 25% of a comparable civilian spouse population. In addition, it estimated that military spouses with a bachelor's degree earn 40% less than their civilian counterparts.   read more
see more...