the glass steagall act passed during the depression era, tightly regulated the u.s. banking system. it stood the country in good stead for about 70 years –until bill clinton signed the bill in 1999 which repealed the glass steagall act.
according to an article in the new york times, from 1995, robert rubin, treasury secretary at the time, is on record as saying the clinton ‘administration continues to favor allowing banks to merge with insurance companies as well as securitites firms.’
the 1999 financial services modernization act, written by phil gramm, who had been advising john mccain up until this past july, was passed by both houses of congress and signed by bill clinton in the same year, the new law effectively repealed glass steagall and the bank holding act of 1956 which prohibited financial companies from owning banks and insurance companies.
glass steagall prohibited the merging of banks, securities firms, and insurance companies, while the financial services modernization act allowed for huge financial conglomerates.
both nancy pelosi and joe biden voted yes on repealling glass stegall on november 4, 1999 and bill clinton signed the bill into law one week later. barack obama was in the state senate at the time, so his hands are clean. and john mccain abstained from voting.
the gramm-leach-bliley act, also known as the financial services modernization act of 199, passed the senate 90-8 and the house 362-57 on november 4, 1999.
i will continue to post variations of this post every few days or at least every few weeks. it is important for people to know where the blame lies. and it is squarely on the shoulders of congressional members from the 90s and especially bill clinton.
Interesting posts and links. And this is a very interesting debate. But one thing I’d be interested to hear you flesh out in a little more detail is the direct link b/w the repeal of this law and the current crisis. I don’t have a lot of time to research these things, but from what I can tell AIG and the investment houses that have collapsed were not combining their insurance/securities activities with routine banking activities. In fact, I find it interesting that many are arguing the investment banks may have collapsed precisely b/c they had TOO LITTLE depositor capital. See link below:
http://www.guardian.co.uk/business/2008/sep/23/goldmansachs.morganstanley
Be curious your reactions. Appreciate the good post!
deleted
the first link leads to this information about glass-steagall: it sought to limit the conflicts of interest created when commercial banks are permitted to underwrite stocks or bonds. In the early part of the century, individual investors were seriously hurt by banks whose overriding interest was promoting stocks of interest and benefit to the banks, rather than to individual investors.