Glass-Steagall Act
Sep 16th, 2008 at 9:06 am by Susie
I found this timeline from the “Frontline” documentary, “The Wall Street Fix“:
In December 1996, with the support of Chairman Alan Greenspan, the Federal Reserve Board issues a precedent-shattering decision permitting bank holding companies to own investment bank affiliates with up to 25 percent of their business in securities underwriting (up from 10 percent).
This expansion of the loophole created by the Fed’s 1987 reinterpretation of Section 20 of Glass-Steagall effectively renders Glass-Steagall obsolete. Virtually any bank holding company wanting to engage in securities business would be able to stay under the 25 percent limit on revenue. However, the law remains on the books, and along with the Bank Holding Company Act, does impose other restrictions on banks, such as prohibiting them from owning insurance-underwriting companies.
In August 1997, the Fed eliminates many restrictions imposed on “Section 20 subsidiaries” by the 1987 and 1989 orders. The Board states that the risks of underwriting had proven to be “manageable,” and says banks would have the right to acquire securities firms outright.
You know, I just knew if I kept looking, I’d find Mr. Andrea Mitchell’s sticky little fingerprints on this.
In May 1998, the House passes legislation by a vote of 214 to 213 that allows for the merging of banks, securities firms, and insurance companies into huge financial conglomerates. And in September, the Senate Banking Committee votes 16-2 to approve a compromise bank overhaul bill. Despite this new momentum, Congress is yet again unable to pass final legislation before the end of its session.
As the push for new legislation heats up, lobbyists quip that raising the issue of financial modernization really signals the start of a fresh round of political fund-raising. Indeed, in the 1997-98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spends more than $200 million on lobbying and makes more than $150 million in political donations. Campaign contributions are targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation.
Since this was a Republican-controlled Congress (ONE Democrat voted in favor of the repeal), we can be sure the bulk of those contributions went to the ranking Republicans on those committees. Also, please note this was post-impeachment: Clinton was horse-trading with Republicans to get at least some of his agenda passed so that he’d have some legacy other than Monica.
But what will happen now is that Republicans will very effectively blame this whole mess on Clinton and the Democratic party - and far too many fair-and-balanced Democrats and members of the librul media will agree.
Because, you know, we Democrats so often lack a sense of proportion. Because anything at all Democrats do makes them just as guilty as Republicans (even though any sentient being should be able to identify the Grand Old Party of Rape and Pillage).
Yay, team!
Again, as I noted during the primaries, Clinton did sign it.
I understand your argument, but at the time–and now–some people had completely erased Clinton’s DLC/centrist ideology and claimed that he and his wife were the second coming of FDR while Obama was really a right-wing politician.
And of course, Clinton was in the position of being forced to horse trade cuz he couldn’t keep his dick in his pants. Pointing that out isn’t evidence of one’s lack of liberal bonafides, it’s a fact.
Both parties are too deferential to corporations and finance in their governance, and this is just the latest example of how it busts us all in the ass.
In “Why Not Me”, Al Franken made repeal of the Glass-Steagall Act the second most important part of his economic plan (after ATM fees).
I doubt the Democrats were the ones who thought the industry should operate without oversight. It’s an important distinction, one any Democrat should be prepared to make.
Thanx for this post, Susie. Yesterday, I heard at least two MCMer’s or their accepted commentator/experts mention Bill Clinton’s signing of this ‘99 legislation as a reason for the collapse.
It’s part of the Villagers’ bipartisan allottment of blame, so necessary when things to wrong. Notice how chary they are of giving Dems kudos for times and things that go well??
Let’s see. A Deomcrat president signs a bill that propels the investment banking failure of today and we shall blame the Republican run Congress.?? Am I mistaken, or has Congress been Democratically controlled for the last 2 years or so..? Why didn’t they repeal the repeal..? Or were their greedy litlle fingers in the pie too..?? keep in mind the process… The buck stops at the top. Unless its a Democrat president of course…Congress can write laws all day, but the Prez has to MAKE them law..But again, they haven’t even proposed any change the last two years.. nice cupcake job, those senators..Obama one of them..
They were too busy cleaning up the elephant droppings left by Republican incompetence and greed. It’s what we do.
Susie, I think you’re mischaracterizing Ralph Brauer’s intent with that post. First of all, I don’t think anyone who’s read Ralph’s book could put him in the same category of “liberal” as the MSM. But that aside, the article doesn’t pin the blame on “the Democrats” — it pins the blame on the man who signed the bill, Bill Clinton. I don’t care whether Clinton was “horse-trading” or anything else; he put his signature on this Republican-led bill that is now killing our financial markets and robbing ordinary Americans of their life savings. Just because Clinton is a Democrat doesn’t mean he’s not at fault, and I commend Ralph for having the audacity to raise these points in the middle of an election season.
Wait, this made it possible for me to get my insurance, banking, credit, and mutual fund investments all from one company. That is pretty sweet, since I take advantage of that and can check one website for all my needs. Still do a little comparison, though.
Anyways, I think right now it is hard to see the forest for the trees, as we are in the middle of recession and things have not fully played themselves out yet. So just keep it shut CNN Biz. Of course they won’t though.
And why do liberals feel they must defend Clinton all the time. He signed the bill, ok, let’s move on. Maybe you feel under attack since he was the only Dem in the WH for the last 28 years, but he was also fairly moderate. May have only taken 1 horse instead of the 20 you would like to think it might have to persuade him.
Waterman asks;
“Am I mistaken, or has Congress been Democratically controlled for the last 2 years or so.”
They have held a slim majority, which finally allows them to control committees, but not enough to override Republican filibustering. The Republicans stated agenda has been to use their filibuster power to prevent any meaningful Democratic legislation for reaching the floor for a vote. Then they can claim, as Waterman has, that the Democrats are doing nothing.
Help! I don’t care if the dems or the republicans are at fault for repeal of Glass-Steagall .. how do we fix the mess and have security in the future? I am terrified for my children and the families they are trying to raise.
Well, for one thing, we need to recognize how it happened so that people don’t make the mistake of putting them back in power.
I feel as though I am in front of that firing squad, picking the buckshot out. First, PLEASE link back to ALL the pieces I have written about Glass-Steagall instead of taking things out of context.
I think you will find the complete story is there if you take the time to read them. I have been writing about and researching this issue for over two years and like it or not it has Bill Clinton’s fingerprints all over it.
It DOES NOT have Barack Obama’s.
They are:
Bill Clinton, Glass-Steagall and the Current Foreclosure and Financial Crisis, Part One
Bill Clinton, Glass-Steagall and the Current Foreclosure and Financial Crisis, Part Two
Bill Clinton, Glass-Steagall and the Current Foreclosure and Financial Crisis, Part Three
Bill Clinton and the End of the American Century
Bill Clinton and the New Bourbonism
The A, B, C’s of the Current Financial Crisis
Finally, please check the Congressional Record for the final vote on the repeal bill, the Gramm-Leach-Bliley Act. I think you will find more than one Democrat in favor. You also will find Bill Clinton’s Treasury Secretary favored the repeal.
I at least appreciate you referring to me as a “fair and balanced Democrat.” Actually If you read my book The Strange Death of Liberal America you will find I support what used to be the core belief of Liberal America and the Democratic Party–the belief that government has a duty to keep the playing field level.
I apologize for listing links, but I don’t know how else to state my case other than to refer you and your readers back to the original source.
Those blaming Bill Clinton for the ultimate repeal of the Glass-Steagall Act should dig a little deeper. True, as president, he signed into law the 1999 Gramm-Leach-Bliley bill that killed the Glass-Steagall Act. But there was no other recourse. The Gramm-Leach-Bliley Act, when it came out of committee, was passed in the Senate 90-8-1 and in the House 362-57-15. These numbers made the bill VETO-PROOF. Bill Clinton could not have prevented the bill from becoming law if a gun had been held to his head.
New here.
Seems to me that if we’re going to lay blame, it’s perfectly obvious: BOTH parties have been long bought by the geniuses of the financial industry. OF COURSE Republican congressweasels did the bankers’ scutwork — that’s what the GOP is all about! But it sure doesn’t follow that Slick Willy Clinton was any friend of the working man himself. Jesus, does nobody remember the sham passed off as welfare “reform”? Clinton loves to brag about its “success”, but you’ll notice that his ONLY measure of success has consistently been the number of people tossed from the welfare roles.
And why on earth do you want to have that discussion publicly? Why do you want to do the Republicans’ work for them and let them off the hook? The fact is, the Repugs had a veto-proof majority with the repeal. No, Clinton wasn’t a progressive - but I’m not going to let the GOP pin this disaster on him.
“15Susie
And why on earth do you want to have that discussion publicly? Why do you want to do the Republicans’ work for them and let them off the hook?”
We should parcel blame where it’s due so that our opponents cannot seize upon the (transparently obvious) fact that *both* Republicans AND Democrats were complicit in this financial “meltdown.” If they do that, it’s only seconds before you get a slimy “what Barack Obama doesn’t want you to know!” attack ad that takes one part truth (Democrats were part of the problem) and mixes it with 20 parts lies (Republicans weren’t involved! It was all Fannie and Freddie! Democrats control Congress, so it’s THEIR fault!) to convince the gullible.
The truth, forcefully stated is better than any “lie to serve the greater good.”
Let’s all be honest. The Democrats ARE complicit in this clusterf*ck, about 20% or so. The Republicans ARE complicit, about 40%. The rest of the blame goes to the slimy financefolks who raped the system, and to us, the American people, for buying transparent loads of horsesh*t instead of accepting that, whether you like it or not, you NEED some regulation of markets that are essential to the American economy.
Let’s attack the right target; not specifically Republicans, but rather the core philosophy of deregulation, and its twin, tax cuts (especially when coupled with legislation that cannot be paid for WITHOUT taxes). Trust me, if we knock out those two pillars of Reaganomics, you’ll still get your desired goal: Republicanism as a philosophy and likely as a political party will be essentially dead for ten years or more.
There’s plenty of blame to go around. Clintons made millions, and everybody else too. Your viewpoint is too narrow. Few will say no when they can get rich.
“Rich” isn’t a dis, it must be nice to be rich, and then one has more money for charity. But when the people in power (government) abandon laws that were crafted to keep bad things from happening because they’ll get rich for doing it, that’s another whole kettle of fish. And so where’s the outrage? Where are the investigations, the indictments, the prison time, the recovery of all that money?
David Williams
You hit the nail on the head. The vote count is on the net for the Phil Graham sponsored bill.
I am not sure what “Susie” was thinking when she said one Democrat voted for the Financial Service Moderation Act of 1999 which killed the G/S act. The vote in the House was 343-86 and 90-8 in the Senate. Some names that voted for it were: Biden, Kerry, Reed, Kennedy, Daschle, Liebermean……….