Senators Bernie Sanders and Elizabeth Warren are putting a new focus on the Glass-Steagall Act, which was, unfortunately, repealed in 1999 and led directly to the financial crises we have faced ever since. Here’s a bit of history of this legislative debacle from an older post on Occasional Planet published several years ago :
On November 4, 1999, Senator Byron Dorgan (D-ND) took to the floor of the senate to make an impassioned speech against the repeal of the Glass-Steagall Act, (alternately known as Gramm Leach Biley, or the “Financial Modernization Act”) Repeal of Glass-Steagall would allow banks to merge with insurance companies and investments houses. He said “I want to sound a warning call today about this legislation, I think this legislation is just fundamentally terrible.”
According to Sam Stein, writing in 2009 in the Huffington Post, only eight senators voted against the repeal. Senior staff in the Clinton administration and many now in the Obama administration praised the repeal as the “most important breakthrough in the world of finance and politics in decades”
According to Stein, Dorgan warned that banks would become “too big to fail” and claimed that Congress would “look back in a decade and say we should not have done this.” The repeal of Glass Steagall, of course, was one of several bad policies that helped lead to the current economic crisis we are in now.
Dorgan wasn’t entirely alone. Sens. Barbara Boxer, Barbara Mikulski, Richard Shelby, Tom Harkin, Richard Bryan, Russ Feingold and Bernie Sanders also cast nay votes. The late Sen. Paul Wellstone opposed the bill, and warned at the time that Congress was “about to repeal the economic stabilizer without putting any comparable safeguard in its place.”
Democratic Senators had sufficient knowledge about the dangers of the repeal of Glass Steagall, but chose to ignore it. Plenty of experts warned that it would be impossible to “discipline” banks once the legislation was passed, and that they would get too big and complex to regulate. Editorials against repeal appeared in the New York Times and other mainstream venues, suggesting that if the new megabanks were to falter, they could take down the entire global economy, which is exactly what happened. Stein quotes Ralph Nader who said at the time, “We will look back at this and wonder how the country was so asleep. It’s just a nightmare.”
According to Stein:
“The Senate voted to pass Gramm-Leach-Bliley by a vote of 90-8 and reversed what was, for more than six decades, a framework that had governed the functions and reach of the nation’s largest banks. No longer limited by laws and regulations commercial and investment banks could now merge. Many had already begun the process, including, among others, J.P. Morgan and Citicorp. The new law allowed it to be permanent. The updated ground rules were low on oversight and heavy on risky ventures. Historically in the business of mortgages and credit cards, banks now would sell insurance and stock.
Nevertheless, the bill did not lack champions, many of whom declared that the original legislation — forged during the Great Depression — was both antiquated and cumbersome for the banking industry. Congress had tried 11 times to repeal Glass-Steagall. The twelfth was the charm.
“Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,” said then-Treasury Secretary Lawrence Summers. “This historic legislation will better enable American companies to compete in the new economy.”
“I welcome this day as a day of success and triumph,” said Sen. Christopher Dodd, (D-Conn.).
“The concerns that we will have a meltdown like 1929 are dramatically overblown,” said Sen. Bob Kerrey, (D-Neb.).
“If we don’t pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world,” said Sen. Chuck Schumer, D-N.Y. “There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive.”
Unfortunately, the statement by Chuck Schumer sounds very much like it was prepared by a lobbyist. This vote underscores the way in which our elected officials are so heavily swayed by corporate and banking money that our voices and needs become irrelevant. It is why we need publicly funded elections. Democratic senators, the so-called representatives of the people, fell over themselves to please their Wall Street donors knowing full well there were dangers for the country at large, for ordinary Americans, in repealing Glass-Steagall.
It is important to hold Democratic senators (along with current members of the Obama administration) accountable for the significant role they have played in the current economic crisis that has caused so much suffering for ordinary Americans. In case you were wondering, the current Democratic Senators who voted yes to repeal the Glass-Steagall act are the following:
Daniel Akaka – Max Baucus – Evan Bayh – Jeff Bingaman – Kent Conrad – Chris Dodd – Dick Durbin – Dianne Feinstein – Daniel Inouye – Tim Johnson – John Kerry – Herb Kohl – Mary Landrieu – Frank Lautenberg – Patrick Leahy – Carl Levin – Joseph Lieberman – Blanche Lincoln – Patty Murray – Jack Reed – Harry Reid – Jay Rockefeller – Chuck Schumer – Ron Wyden
Former House members who voted for repeal who are current Senators.
Mark Udall [as of 2010] – Debbie Stabenow – Bob Menendez – Tom Udall -Sherrod Brown
No longer in the Senate, or passed away, but who voted for repeal:
Joe Biden -Ted Kennedy -Robert Byrd
These Democratic senators would like to forget or make excuses for their enthusiastic vote on the repeal of Glass Steagall, but it is important to hold them accountable for helping their bank donors realize obscene profits while their constituents lost jobs, savings and homes. And it is important to demand that they serve the interests of the American people.