I can’t let this one go today. All day I’ve been hearing both sides of this presidential election talk about how the other’s to blame for our economic woes. About how the Wall Street drop and the financial services industry’s problems go back to regulation policies that date back to the ’30s (read “New Deal” here), about context and language and so on.
Yet both parties and our economic leaders are both to blame for the current financial, economic and housing mess. At the end of ’99, both houses of Congress passed the Gramm-Leach-Bliley Financial Services Modernization Act (see Wikipedia for details). This Act essentially repealed the Glass-Steagall Act of ’33, which created the FDIC (protecting individual bank accounts up to $100,000). It allowed banks to merge with investment firms and mortgage firms, to buy stock into such entities, to blur the lines between the different financial services sectors. A Republican Congress voted for this (with some support from Democrats), and then President Clinton signed it. Both parties are to blame.
The only reason I even remember this is because of my work at Presidential Classroom in ’99 and 2000. I remember reading the Wall Street Journal about a week after this bill passed, thinking that this was bad news for our economy. Boy have chickens come home to roost! This is one time that I know that there are no winners on this particular issue.