Regulation Nation

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While some parts of the Glass-Steagal Act were repealed as early as the 1980s, the final nail in the coffin was the 1999 Gramm-Leach-Bliley Act (yes, that Gramm).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…


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