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

Blueprint for Impeachment—The Mueller Report

Without using the word “impeachment,” Mueller and his team bluntly present the evidence that Trump has committed multiple impeachable offenses. Mueller considers eleven possible areas of obstruction. In some cases, Mueller writes that the acts do not rise to the level of legal obstruction of justice. But the majority do.   read more

Omar al-Bashir, World’s Worst Dictator, Overthrown at Last

Back in 2006, I wrote a book called Tyrants: The World’s 20 Worst Living Dictators. I gave the dubious honor of first place to Omar al-Bashir of Sudan. Now, 13 years later, Bashir has finally been overthrown. Unfortunately, the man who led the military coup that overthrew Bashir is General Awad ibn Ouf, who, since 2006, has been financially sanctioned by the U.S. government for his role in the genocidal attacks carried out in the Darfur region of Sudan.   read more

Imagining the Mueller Report Uncensored

Attorney General William Barr’s four-page summary of the Mueller Report (which he now says was not a “summary”) included a grand total of 65 words from the report itself and zero complete sentences. What if the context of the first and last excerpts are…   read more

Trump Calls Superman a Bad Role Model because He’s an Illegal Alien

U.S. President Donald Trump tweeted that the time has come to remove all Superman comic books from libraries and shops and all Superman movies from all sources because “they glorify an illegal alien.”   read more

Trump Cancels Sanctions Against Iran and Venezuela

Iran’s foreign ministry spokesperson, Bahram Ghasemi, explained the sudden change. “We offered Trump land to build a residential tower in Tehran and a second one in Isfahan with a promise that the tenants would not be allowed to change the buildings’ names from Trump Tower for ten years upon threat of death."   read more
see more...