Where is the Glass-Steagall Act when we need it? In 1933, U.S. Sens. Carter Glass (D-Vt.) and Henry Steagall (D-Ala.) introduced the legislation which bears their name. Due largely to unregulated bank market speculation, we 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 Federal Deposit Insurance Corp. In 1956, the act was further strengthened in order to prosecute banks engaging in non-banking activity. It also disallowed them to buy banks in another state.
From that time on, it has been the lobbyists’ field day and their efforts were not in vain, for they had begun the dilution of the Glass-Steagall. In the 1960s, banks were allowed to enter the municipal bond market and in the ’70s they were allowed money market accounts, allowed check writing and offered credit and debit cards.
The ’80s, with the help of Alan Greenspan and the Federal Reserve board, allowed banks to underwrite businesses’ mortgage-backed securities and allowed, beginning with Travelers and Citibank, the merging of banks, security firms and insurance companies, creating the huge financial conglomerates which we have today, bringing about the “too big to fail” dilemma.
There are other neuterings of the GSA, but the death knell came Oct. 22, 1999. After 12 tries in 25 years of a non-stop lobbying blitz spending hundreds of million of dollars, Glass-Steagall was repealed, placing our trusted banks in the same position they were in precipitating the Great Crash of 1929.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 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 then-President Bill Clinton. On Nov. 4, 1999, the final version of the bill was passed by the U.S. House of Representatives (362-57) and the Senate (90-8) and was signed into law by Clinton Nov. 12 as the toothless Graham-Lesch-Billey Financial Modernization Act of 1999, named after Phil Graham (R-Texas) and Jim Lesch (R-Iowa).
If we do not regulate and control the banks, they will control us.
Nicholas Zizelis
Bayside
