Dear Glass-Steagall Act, Where are you now when we need you? And so badly?
In 1933 Sen. Carter Glass (D-Vt.) and Sen. Henry Steagall (D-Ala.) introduced the legislation which bears their name. Due largely to unregulated bank market speculation, we had suffered the Great Crash of 1929. The GSA legislation limited the conflicts of interest created when banks are permitted to underwrite stocks or bonds and it established the FDIC. In 1956 the act was further strengthened in order to prosecute banks engaging in nonbanking activity. It also disallowed them to buy banks in another state.
From that time on it has been the lobbyists’ field day in diluting the Glass-Steagal Act. In the ’60s banks were allowed to enter the municipal bond market, and in the ’70s they were allowed money market accounts and to offer credit and debit cards. In the ’80s, with the help of Alan “Deregulation” Greenspan and the Federal Reserve Board, they were allowed to underwrite businesses’ mortgage-backed securities. Beginning with Travelers and Citibank, the merging of banks, security firms and insurance companies was also allowed, creating the huge financial conglomerates we have today — bringing about the “Too Big to Fail” dilemma.
There were numerous neuterings of the GSA but the death knell came on Oct. 22, 1999. After 12 tries in 25 years of a nonstop lobbying blitz in which hundreds of millions of dollars were spent, what was left of Glass-Steagall was repealed, placing our trusted banks in the same position they were in precipitating the Great Crash of 1929. Cliches such as, “History repeating itself” and “The more things change, the more they stay the same” are certainly apt.
Although it was two Democrats with foresight back in 1933 who realized the danger in allowing banks to set the rules by which they play, the repeal was jointly agreed upon by both parties as well as President Clinton. On Nov. 4, 1999 the final version of the Graham-Lesch-Billey Financial Modernization Act was passed by the House 362-57 and the Senate 90-8. Clinton signed it into law on Nov. 12.
Although it’s not surprising that it was the Democrats who initialed bank control and Republicans who gave the control back to the banks, there is enough blame to go around. They jointly repealed GSA.
If we do not regulate and control the banksters, they will control us. Diametrically opposed, both Gingrich (R) and Clinton (D) now say it was a mistake to repeal the Glass-Steagall Act. Indeed it was, and we have been witnessing and living that mistake.