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Sun Mar 10, 2013, 11:20 PM

 

Repeal of Glass-Steagall Caused the Financial Crisis

Derek Gendvil ‏@dgendvil

Repeal of Glass-Steagall Caused the Financial Crisis - Economic Intelligence (http://usnews.com ) http://t.usnews.com/bC3B0 via @usnews


http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law that separated commercial and investment banking for seven decades. If there is any hope of avoiding another meltdown, it's critical to understand why Glass-Steagall repeal helped to cause the crisis. Without a return to something like Glass-Steagall, another greater catastrophe is just a matter of time.

History is a good place to begin. After the Depression of 1920-21, the United States embarked on a period of economic prosperity known as the Roaring Twenties. It was a time of innovation, especially in consumer goods such as automobiles, radio, and refrigeration. Along with these goods came new forms of consumer credit and bank expansion. National City Bank (forerunner of today's Citibank) and Chase Bank opened offices to sell securities side-by-side with traditional banking products like deposits and loans.

As the decade progressed, the stock market boomed and eventually reached bubble territory. Along with the bubble came market manipulation in the form of organized pools that would ramp up the price of stocks and dump them on unsuspecting suckers just before the stock collapsed. Banks joined in by offering stocks of holding companies that were leveraged pyramid schemes and other securities backed by dubious assets.

In 1929, the music stopped, the stock market crashed and the Great Depression began. It took eight years from the start of the boom to the bust. Subsequent investigations revealed the extent of the fraud that preceded the crash. In 1933, Congress passed Glass-Steagall in response to the abuses. Banks would be allowed to take deposits and make loans. Brokers would be allowed to underwrite and sell securities. But no firm could do both due to conflicts of interest and risks to insured deposits. From 1933 to 1999, there were very few large bank failures and no financial panics comparable to the Panic of 2008. The law worked exactly as intended.

(More at the link.)

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Arrow 27 replies Author Time Post
Reply Repeal of Glass-Steagall Caused the Financial Crisis (Original post)
Fire Walk With Me Mar 2013 OP
thelordofhell Mar 2013 #1
DonCoquixote Mar 2013 #2
Festivito Mar 2013 #8
sabrina 1 Mar 2013 #13
Festivito Mar 2013 #16
DonCoquixote Mar 2013 #14
Festivito Mar 2013 #17
DonCoquixote Mar 2013 #19
Festivito Mar 2013 #20
DonCoquixote Mar 2013 #23
sabrina 1 Mar 2013 #21
Festivito Mar 2013 #22
AnotherMcIntosh Mar 2013 #3
Leslie Valley Mar 2013 #4
Festivito Mar 2013 #9
Leslie Valley Mar 2013 #15
Festivito Mar 2013 #18
AnotherMcIntosh Mar 2013 #5
Spitfire of ATJ Mar 2013 #6
Shanti Mama Mar 2013 #7
Festivito Mar 2013 #10
DonCoquixote Mar 2013 #24
Festivito Mar 2013 #11
Blanks Mar 2013 #12
cprise Apr 2015 #25
Name removed Feb 2019 #26
Demsrule86 Apr 2019 #27

Response to Fire Walk With Me (Original post)

Sun Mar 10, 2013, 11:57 PM

1. +1,000,000,000,000,000,000,000

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Response to Fire Walk With Me (Original post)

Mon Mar 11, 2013, 12:04 AM

2. If Hillary promised to undo her hubby's mistake

I would work on her campaign tonight. The problem is, she does nto understand why it was a BAD IDEA that we need to ACTIVELY TURN BACK FROM.

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Response to DonCoquixote (Reply #2)

Tue Mar 12, 2013, 04:01 AM

8. Whoa! That's RW claptrap. That bill was veto proof.

Bill Clinton's signing of that bill versus a few days difference after a veto was probably the best move to make. It gave our side a little more time to set the new connection on as good course as might be possible to set.

Bill Clinton did not have a choice between a bill and no bill as the RW would infer and your post wrongly infers.

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Response to Festivito (Reply #8)

Tue Mar 12, 2013, 11:42 AM

13. Maybe if the Democrats who voted for it had held their ground it would not have

been veto-proof. This and so many other bad policies happened because many Democrats chose to vote with Republicans. I have never seen a Republican idea that was good for ordinary people in my lifetime. I am a Democrat because of THEIR ideas, policies that changed people's lives for the better. But I have learned over the past decade that many times Republican ideas get passed WITH the help of Democrats.

Now that many people are aware of this hopefully we can begin to change it. By supporting candidates who will actually FIGHT for what is right. I see no reason ever to 'compromise' with people who are causing so much harm to so many people.

The rescinding of Glass Steagal passed with only 7 Dem Senators voting against that bill and 1 Republican. Why did so many Democrats vote to do that? Have they ever been held accountable for MAKING it veto proof?

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Response to sabrina 1 (Reply #13)

Tue Mar 12, 2013, 08:44 PM

16. Accountable? Hah! Probably got campaign funds, media silence, and think-tank "research."

BTW, "Research" is stuff that sounds good, but may or may not be true.

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Response to Festivito (Reply #8)

Tue Mar 12, 2013, 03:02 PM

14. RW claptrap

Ok, now I know how MannyG feels when people who are defending a RW action get accused of being right wing. repealing GS was bad, all the way, and you know it.

And the point stands, if Hillary was to promise to put it back, I, veteran of the 2008 primary, would glaldy pick up her banner.

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Response to DonCoquixote (Reply #14)

Tue Mar 12, 2013, 09:06 PM

17. It's a RW talking point hit on Bill Clinton where it's all Repubs and few Dems.

It's a hit on our brand to low information voters who tend to be our swing voters.

It's alright to be mislead. But, when truth unravels the lie, it's time to say it right -- not claim you're accused of knowing when you weren't accused of knowing.

I'd bet Bill and Hillary Clinton would like to get rid of GS, but it's not a question of wanting, it's a question of how to get rid of it. It has to come from the House. The House is Repub.

If you want to pick up a banner, every Repub in the House will have a Dem challenger. That's a lot of banners to choose from.

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Response to Festivito (Reply #17)

Tue Mar 12, 2013, 10:10 PM

19. I'd bet Bill and Hillary Clinton would like to get rid of GS, but it's not a question of wanting,

They did get rid of GS, and that is the PROBLEM. We need it BACK!

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Response to DonCoquixote (Reply #19)

Wed Mar 13, 2013, 03:39 AM

20. Alright now. Very funny. Yes, they'd like to reinstate GS, reverse the reversal of GS,

reverse the GLB Act reversal of GS, enact a new GS. (That and I shouldn't have had that last couple of drinks at the bar last night.)

My errant shorthand gave you an opportunity to emblazon a post against Bill and Hillary, and so you took that opportunity.

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Response to Festivito (Reply #20)

Wed Mar 13, 2013, 02:44 PM

23. actually, errant thinking did

Your thinking that Hillary will do anything but crush the left, fatten the rich, and stomp on those who have already been stomped on. Yes, she is preferable to Jeb, but when you start measuring the beneifts of death by fire (GOP) versus doing 20 years to life (Clinton) you cannot pretend to offer a product worthy of praise.

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Response to Festivito (Reply #17)

Wed Mar 13, 2013, 09:26 AM

21. We aren't a 'brand' we are people. The repeal of GS was most definitely Right Wing

Clap Trap. And all but seven Democrats in the Senate went along with that Right Wing legislation. Why did they do that? Have you Dorgan's speech at the time? Funny how he knew exactly what repealing that legislation would do and predicted accurately the end result of doing ten years down the road. He did what any Democrat should have done, he voted against that Right Wing garbage. Unfortunately he didn't have much support from his own party.

So I repeat, if Democrats started acting like Democrats, Right Wing Clap Trap would be a lot harder to get passed.

Are you denying the facts behind that legislation? Are you saying NO Democrat helped to get rid of GS?

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Response to sabrina 1 (Reply #21)

Wed Mar 13, 2013, 12:57 PM

22. We're not a brand, we have a brand.

Why did some Dems vote to drop GS? ... money.
What facts would I be denying? I have no idea what you might mean with that question.
Am I saying no Dems helped get rid of GS? No. Where did you even get that idea?

Dems fall for money sometimes. Repubs do it all the time.

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Response to Fire Walk With Me (Original post)

Mon Mar 11, 2013, 12:08 AM

3. K&R

 

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Response to Fire Walk With Me (Original post)

Mon Mar 11, 2013, 12:17 AM

4. By the time the affiliation restrictions in the Glass–Steagall Act were repealed

 

It was pretty much already being ignored. In 1998 Citibank (a bank) was allowed to merge with Salomon Smith Barney(an investment house) by the Federal Reserve Board’s new interpretation of the Glass–Steagall Act.

President Bill Clinton publicly declared "the Glass–Steagall law is no longer appropriate" and he signed the repeal know as the Financial Services Modernization Act of 1999 into law.


Bill Clinton signs into law the
Gramm-Leach-Bliley Financial Services Modernization Act,
November 12, 1999.


Oh and Sid, notice the gun to Bills' head in that photo?

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Response to Leslie Valley (Reply #4)

Tue Mar 12, 2013, 04:14 AM

9. The gun was the happy veto over-riders standing behind him.

All of the Republicans and just enough Democrats that trading, strong-arming and campaign donations could influence.

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Response to Festivito (Reply #9)

Tue Mar 12, 2013, 04:59 PM

15. Have a gander at Clinton's signing statement and tell me they were twisting his arm

 

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Response to Leslie Valley (Reply #15)

Tue Mar 12, 2013, 09:33 PM

18. I would, I could. He starts by talking about other stuff:

Jokes, partisanship, thanks for individual duty, ... stalling.

He applauds the American system of compromise without calling it such. He's slick, always has been. He can use the words it and that to mean what he wants instead of what others hear because they want to hear what they want to hear.

"Glass-Steagall law is no longer appropriate for the economy in which we live" Well, it isn't. It's been voted out. So, it's no longer appropriate.

He couldn't just come out and say it was bad. He'd have lost control of any further directions to be made around it.

But, it doesn't matter me because this is not the point I'm making. I'm saying it's wrong to blame Bill Clinton for signing a veto-proof bill. He's not responsible for it being veto-proof.

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Response to Fire Walk With Me (Original post)

Mon Mar 11, 2013, 01:04 AM

5. The Greed of the Politicans who Supported the Repeal of Glass-Steagall Caused the Financial Crisis.

 

According to Senator Durbin,

"SENATOR DICK DURBIN: The banks -- hard to believe in a time when we're facing a banking crisis -

"RADIO HOST: Right.

"SENATOR DICK DURBIN: -- that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place.

http://www.pbs.org/moyers/journal/05082009/transcript1.html


They can't own the place without owning politicians. The question is, "How much does it cost to own a politician?" The answer is, "It varies."

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Response to Fire Walk With Me (Original post)

Mon Mar 11, 2013, 02:25 AM

6. Talk to a FOX "News" viewer and tell them people on Wall Street should go to jail and they'll say,..

 

"What for?"

Then they will say it was Freddy's Fanny or something like that...



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Response to Fire Walk With Me (Original post)

Mon Mar 11, 2013, 06:09 AM

7. I worked at JP Morgan when...

We would have been fired for talking with someone who worked on the other side of the "chinese wall" that separated us, commercial banking, from the investment group.

The bank was by no means perfect back in the 70s but I believe everyone recognized the need for Glass Steagall. It's repeal is a big reason I'm not a Clintonista; they're corporatists.

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Response to Shanti Mama (Reply #7)

Tue Mar 12, 2013, 04:23 AM

10. Forced to choose between a Clintonista and a Republican...

It's a Clintonista every time.

I would like to see someone more left than Clinton or Obama, but, dang it, this is the real world.

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Response to Festivito (Reply #10)

Wed Mar 13, 2013, 02:48 PM

24. If Hillary wins the PRIMARY in 2016

I will votew for her. And if Obama can win the election, despite the fact that a bunch of democrats on the left and the right have always, and WILL always hate him, then Hillary should be able to do the same.

But just as the Hillary folk used every weapon of war, every labeling of someone as a "sexist", every demonization of the "young folk", then I will bring out every gun in ,my arsenal to make sure that someone to her left wins, or failing that, to make sure she knows that her survival depends on making affirmative, clear moves to the left, and that her failure to do so will result in agony!

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Response to Fire Walk With Me (Original post)

Tue Mar 12, 2013, 04:33 AM

11. GS aided the crash, but the cause was the April 2004 unfettering of the banks.

Just a few months before election and all during the election that 10% rule went flat thanks to Bush's SEC placements. Loans bundled with insurance policies (CDOs, CDSs, CMOs) were as good as cash and became the new 10% in that old rule.

And, that rule was not reported in the press until October 2008, as the economy tanked, as the election loomed. Hardly anyone had time to comment.

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Response to Fire Walk With Me (Original post)

Tue Mar 12, 2013, 09:14 AM

12. If its such a problem; how come the news doesn't cover it?

That would be because the same thing happened to the 'media monopolies'. Mergers between television stations and radio stations used to be prevented by similar kinds of laws. They've been so weakened over the years that now; in some areas all of your news media might be owned by Bain capital.

It makes it difficult to make it known that it is even a problem.

They're all in bed together.

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Response to Fire Walk With Me (Original post)

Mon Apr 6, 2015, 01:01 PM

25. BOTH Clintons wanted Glass-Steagall repealed

And they are both in denial about the role that repeal played in the 2008 crisis.

Here is another article about the crisis:

http://wallstreetonparade.com/how-the-new-york-times-hides-the-truth-about-wall-streets-catastrophic-misdeeds/

Hillary's fans can quote Forbes magazine till they're blue in the face. But they can't change history.

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Response to Fire Walk With Me (Original post)


Response to Fire Walk With Me (Original post)

Mon Apr 8, 2019, 04:05 PM

27. A thread on DU letting the GOP off the hook and blaming Democrats foe 2008

Which is bullshit. The banks and Bush caused 2008.

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