By Chuq from Eyesonobama.com:
In 1999, Senator Byron Dorgan stood up and declared that in 10 years, the US was going to regret all the market deregulation that was going on at the time. The New York Times called it, too. So how did the rest of Congress- Republicans and Democrats alike- drop the ball?
Recently, while I was researching a piece for my blog, I found a bunch of information on our current crisis and its beginnings. Since I began the research, I've been amazed by one piece of legislation in particular: the Gramm-Leach-Bliley Act of 1999 (a.k.a the Financial Services Modernization Act of 2000), which repealed the Depression-era Glass Steagall Act of 1933.
Take it from this article in the New York Times on November 15th of 1999:
"The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation’s financial system. The original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression.
"The opponents of the measure gloomily predicted that by unshackling banks and enabling them to move more freely into new kinds of financial activities, the new law could lead to an economic crisis down the road when the marketplace is no longer growing briskly."
President Bill Clinton’s Treasury Secretary, Larry Summers- now the Director of the National Economic Council for the Obama Administration- was a champion of the Gramm-Leach-Bliley Act. "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," Summers said. "This historic legislation will better enable American companies to compete in the new economy."
Sen. Byron Dorgan of North Dakota was an outspoken opponent of the plan:
"I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010. I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness."
When Dorgan made this assessment he was a minor player in the Senate, but he was smart enough to see this coming. If hindsight is 20/20, what is foresight?
The GOP has been hitting Obama hard on his solutions to the economic problems, but they all seem to have amnesia. Those outraged at the economic situation like Senators Chris Dodd (D-CT), John McCain (R-AZ), Mitch McConnell (R-KY), and Evan Bayh (D-IN) voted in favor of the Act. The House is the same; the most outrage has come from House Minority Leader John Boehner (R-OH), who also voted in favor of the Act. Oh yeah, let us not overlook the rantings of Barney Frank (D-MA), who also supported the Act.
Obama and the Democrats are trying to lay the blame for the economic situation in the lap of George W. Bush. Now, I can't believe I am defending the guy, but the reality is that it all began with the Clinton administration and good old Larry Summers. And the most senior Democrats in Congress don't exactly have clean hands, either.
Even though there were opponents of the Act who in some cases knew exactly what would happen, all in Congress had the same reaction: what could it hurt?
The Act passed in 2000 and went into effect in 2001 and 10 years later we see just how effective it was and how prophetic Sen. Dorgan was. Maybe he should be in charge of the committee that oversees the financial dealings of the country, apparently he is a bit smarter than the average Congressperson.
After all, what could it hurt?
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