The Glass-Steagall Act of 1933... Very important please read up on this...
By missybal
@missybal (4490)
United States
March 21, 2009 11:11am CST
Did amendments to this act that got us out of the great depression cause this mess we are in today my creating the too big to fail companies?
This is copied from the Wikipedia online for the most part and I ask you to please do a little research on this and you tell me if you come to the same conclusion I do.
The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation.
Some provisions such as Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980, signed by Carter.
Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act, Signed by Bill Clinton.
The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999, is an Act of the United States Congress which repealed part of the Glass-Steagall Act of 1933, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.
The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services under brands including Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act by combining insurance and securities companies, if not for a temporary waiver process. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.
The repeal enabled commercial lenders such as Citigroup, which was in 1999 then the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. It is believed that the repeal of this act contributed to the Global financial crisis of 2008–2009.
The year before the repeal, sub-prime loans were just 5% of all mortgage lending. By the time the credit crisis peaked in 2008, they were approaching 30%.
1 response
@irisheyes (4370)
• United States
21 Mar 09
No matter how you look at it. We HAVE eventually to get some of the Glass Steagall regs back in place. I believe parts of the act repealed by Reagan caused the collapse of the S&Ls and we had fair warning then of what was to come.
The investment banking industry lobbied for 20 years and spent over 300 million dollars to get Glass-Steagall dismantled. They got what they wanted and we got the worst financial crises since the Great Depression. their argument was that Glass steagall was archaic and prevented financial growth. In the meantime, the Chinese set up a modern banking system incorporating Glass Steagall's provisions and wound up with the fastest growing economy on the face of the earth.
This Act was the firewall in our financial system and repealing it was a huge mistake. Mr. Roosevelt and his people knew what they were doing and we better be damn careful about undoing key FDR legislation in the future. Fortunately, Bush never got around to overhauling Social Security. It would probably have been another disaster just like the repeal of Glass Steagall.
Please note, I'm in no way condeming the 30 years worth of presidents and legislaters that got rid of Glass Steagall. I believe that they probably believed they were acting in the best interests of the country but they were influenced by investment banking and they were wrong. It's time they all learned that it's not wise to mess with Mr. Roosevelt's legislature. Many of the actions taken by his first 100 days are now the lynchpins of our system and we need to be very, very careful about how we revise them.
