I was just doing some packing and listening to an interview on NPR of Steve Fraser, the author of two books about Wall Street.
He was discussing the Glass-Steagal Act of 1933, which was essentially meant to protect America from another Great Depression. Among it’s banking reforms, the Glass-Steagal Act established the FDIC and prevented commercial banks from operating investment arms.
While some parts of the Glass-Steagal Act were repealed as early as the 1980s, the final nail in the coffin was the 1999 Gramm-Leach-Bliley Act (yes, that Gramm). It was passed with pretty bipartisan support and signed by Clinton.
What really struck me is how anyone, anywhere could have ever believed that de-regulation was the way to go. After the Great Depression and the New Deal, America recovered quite robustly (albeit with a war effort that helped the boost) and was well on it’s way to superpower-dom. I understand that there were some ups and down in the market for the next forty or so years, by the 1990s was a decade of spectacular growth. To me, that would seem to confirm that many of the post-1929 regulations were not just necessary in the 1930s and the 1940s, but had been doing their job for a long time since.
So we repeal the Glass-Steagal act definitively in 1999, and in less than ten years we have such an economic meltdown that mothers are calling into C-Span crying about the possibility of having to eat peas and porridge for the rest of their lives. That today only 3 major Investment Banks remain…and my commercial bank was just bought out by Citigroup.
Why de-regulate in the first place, Reaganites? It seems that history is shouting this message from the rooftops…