Glass-Steagall

dissent ~<a href="https://www.marketwatch.com/story/end-of-glass-steagall-did-not-lead-to-2008-wall-street-meltdown-fed-report-suggests-2017-07-31">https://www.marketwatch.com/story/end-of-glass-steagall-did-not-lead-to-2008-wall-street-meltdown-fed-report-suggests-2017-07-31</a>=<a href="https://thinkprogress.org/gingrich-admits-deregulation-of-wall-street-in-the-90s-was-probably-a-mistake-4bb53f03793d/">https://thinkprogress.org/gingrich-admits-deregulation-of-wall-street-in-the-90s-was-probably-a-mistake-4bb53f03793d/</a>
11/11Several of the GOP’s 2012 presidential hopefuls have called — <a href="http://thinkprogress.org/economy/2011/09/13/317692/financial-crisis-gop-wall-street/" rel="noopener" target="blank" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">loudly and often</a> — for the repeal of the Dodd-Frank financial reform law, which is aimed at preventing a repeat of the 2008 financial crisis. But with the possible exception of Rep. Michele Bachmann (R-MN), no one has been more adamantly in favor of ditching Dodd-Frank than Newt Gingrich.<div class="postcontent" style="box-sizing: inherit; line-height: 2.2rem; margin-bottom: 2em;">Gingrich claims that Dodd-Frank is “<a href="http://thinkprogress.org/economy/2011/08/19/299753/gingrich-dodd-frank-killing-banks/" rel="noopener" target="blank" style="background-color: rgb(255, 255, 255); box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">killing the banking industry</a>,” and says that job creation will be sparked by simply repealing the bill and letting Wall Street go right back to the same shenanigans that led the nation into the Great Recession. But during an interview today with ABC News’ Jake Tapper, Gingrich admitted that the 1990s repeal of the Glass-Steagall Act — the firewall between commercial and investment banks — was “probably a mistake”:<blockquote name="8e1d" id="8e1d" class="graf graf--blockquote graf-after--p" style="background-color: rgb(255, 255, 255); box-sizing: inherit; clear: both; margin: 0px 1.5625rem; padding: 0px; position: relative; border-left: 3px solid rgb(87, 87, 206);">TAPPER: One question I want to ask has to do with your call to repeal the Wall Street reforms, Dodd-Frank. I don’t think a lot of Americans would understand why anyone would want to repeal regulations that happened after this calamity on Wall Street. If you disagree with those regulations that were imposed, do you agree at least that there should be some new reforms or regulations?</blockquote><blockquote name="1d83" id="1d83" class="graf graf--blockquote graf-after--blockquote" style="background-color: rgb(255, 255, 255); box-sizing: inherit; clear: both; margin: 0px 1.5625rem; padding: 0px; position: relative; border-left: 3px solid rgb(87, 87, 206);">GINGRICH: Sure, there should be very decisive reforms. I think, in retrospect, repealing the Glass-Steagall Act was probably a mistake. We should probably reestablish dividing up the big banks into a banking function and an investment function and separating them out again.</blockquote>Watch ]The repeal of Glass-Steagall led to the creation of mega-banks like Citigroup and JP Morgan Chase that combine traditional lending with risky investment banking. Many economists believe that the repeal <a href="http://thinkprogress.org/economy/2008/09/20/172364/economists-blame-gramm/" rel="noopener" target="blank" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">led to the financial crisis of 2008</a>. “As a result [of the repeal], the culture of investment banks was conveyed to commercial banks and everyone got involved <a href="http://thinkprogress.org/economy/2008/09/20/172364/economists-blame-gramm/" rel="noopener" target="blank" style="background-color: rgb(255, 255, 255); box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">in the high-risk gambling mentality</a>. That mentality was core to the problem that we’re facing now,” said Nobel Prize winning economist Joseph Stiglitz.Though he had resigned by the time the final blow was dealt to Glass-Steagall in 1999, Gingrich was instrumental in picking it apart. In fact, the New York Times noted in 1998 that, during a failed attempt to repeal Glass-Steagall, Gingrich “scurried through the afternoon <a href="http://www.nytimes.com/1998/04/01/business/house-leaves-finance-law-of-30-s-intact.html?pagewanted=2&src=pm" rel="noopener" target="blank" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">to line up the necessary votes</a>” in favor of repeal.Reinstating Glass-Steagall would require breaking up the biggest banks, a step much further than Dodd-Frank embraced and something to which the Obama administration was never open (<a href="http://thinkprogress.org/economy/2009/12/16/173057/treasury-walkman/" rel="noopener" target="blank" style="background-color: rgb(255, 255, 255); box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">to its detriment</a>). But Gingrich is not the only Republican to advocate such a step; both former <a href="http://thinkprogress.org/economy/2011/10/13/342919/huntsman-glass-steagall-break-up-banks/" rel="noopener" target="blank" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">Gov. Jon Huntsman</a> (R-UT) and <a href="http://thinkprogress.org/politics/2009/12/16/73994/mccain-gramm-repeal/" rel="noopener" target="blank" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">Sen. John McCain</a> (R-AZ) have called for a return to Glass-Steagall, as did <a href="http://thinkprogress.org/economy/2009/10/28/172992/reed-citi-repeal/" rel="noopener" target="blank" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; border-bottom: 1px solid rgb(144, 141, 255);">former Citigroup CEO John Reed</a>, who was instrumental in having the regulation repealed.</div><footer class="posttags" style="box-sizing: inherit; letter-spacing: 1px; line-height: 2rem; margin-bottom: 2em; clear: both; background-color: rgb(255, 255, 255);"><a href="https://thinkprogress.org/tag/banks/" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; font-weight: 600; text-transform: uppercase;">#BANKS</a>, <a href="https://thinkprogress.org/tag/economy/" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; font-weight: 600; text-transform: uppercase;">#ECONOMY</a>, <a href="https://thinkprogress.org/tag/financial-regulation/" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; font-weight: 600; text-transform: uppercase;">#FINANCIAL REGULATION</a>, <a href="https://thinkprogress.org/tag/newt-gingrich/" style="box-sizing: inherit; text-decoration-line: none; word-break: break-word; font-weight: 600; text-transform: uppercase;">#NEWT GINGRICH</a></footer>=https://www.nytimes.com/1995/11/02/business/no-new-deal-for-banking-efforts-to-drop-depression-era-barriers-stall-again.html
All the big players had lined up behind the deregulation of America's financial markets, but on a cool, damp day in June, House Speaker Newt Gingrich had second thoughts.
The Clinton Administration, most Congressional Republicans and Democrats, the Federal Reserve, big banks, and many insurers and securities firms all sought to dismantle the Depression-era Glass-Steagall law that established walls between the banking and securities industries. But numerous House freshmen had been hearing from another faction -- insurance agents who feared such an overhaul would put them out of business. And the House freshmen had relayed their constituents' concerns to the Speaker.
At a closed-door meeting of five senior Republican Congressmen and three aides on June 12, Mr. Gingrich made his decision, according to participants in the meeting and memorandums from it. Overriding the objections of Jim Leach, a Republican from Iowa who is the chairman of the House Banking Committee, Mr. Gingrich ordered the insertion into the bill of a rider that would keep banks out of the insurance business indefinitely.
While it has only become clear in recent weeks that the drive to repeal Glass-Steagall is in jeopardy, that was the moment it ran off the rails.
A year into their "revolution," Republicans are being reminded that rewriting laws affecting their traditional business constituencies can be a lot harder than cutting welfare. This year's two biggest items on the corporate Congressional agenda -- the deregulation of banking and of telecommunications -- have both sunk into lobbying's equivalent of trench warfare. Instead of presenting a united face to a more sympathetic Republican Congress, many industries are sending lobbyists into long, fractious battles over arcane details.
The reason for adding the insurance rider to the Glass-Steagall repeal, Mr. Gingrich told big-bank chief executives in a recent closed-door meeting, was simple: Insurance agents can turn out more votes on the issue than bankers can.
"He was pretty matter-of-fact about it," said Tony Cluff, executive director of the Bankers Round Table, which organized the meeting. "There are a lot more insurance agents out there than there are bankers."
It wasn't supposed to be this way. Almost everybody agreed that Glass-Steagall was an anachronism in a global economy. Enacted in 1933 to prevent a recurrence of financial skulduggery that many believed touched off the Great Depression, the act is widely viewed today as a drag on the economy. Advocates for changing Glass-Steagall contend that it not only prevents the formation of American financial giants that could compete better on world markets, but also stifles competition at home.
Mr. Gingrich's about-face has not sunk the legislation, but it has further muddied the waters about what shape it will take and has called into question the assumption -- held until very recently by many lawmakers -- that some new law would be enacted in 1995.
"I'm still hopeful that we'll pull it off, but it's not looking good," said Representative Marge Roukema, a New Jersey Republican who heads the House Banking subcommittee on financial institutions.
The push to end many Glass-Steagall provisions is now on hold. Members of Congress and business leaders are casting around for ideas on what to do next. House leaders are nervous about bringing the reform bill to a vote, only to expose members to a lobbying crossfire from powerful and wealthy industries.
"Unfortunately, it is very controversial and we're not interested in any controversy that takes us off message and off stride for the rest of this year," Representative Tom DeLay of Texas, the deputy majority leader, said recently. "And if we have to pick amongst our friends and we have to work through this controversy, we'd rather do it next year."
What changed the outlook so drastically was grass-roots lobbying. Insurance agents were farther from the center of power in Washington than other interested groups, but they quickly gained the upper hand in the battle for Congressional hearts and minds late this spring.
The nation's half-million insurance agents are everywhere; they tend to be influential members of their local communities, and they have long been politically active in defense of their interests. When the House Banking Committee took up its bill in early May, lobbyists for the agents hovered in the hallways and successfully urged members to oppose an amendment that would have let banks merge with insurers.
Then, within hours after the committee approved the bill, the agents upped the ante, saying they were withdrawing their support until an amendment was added that would permanently bar banks from selling any insurance for which they did not already have regulatory approval.
The following weekend of May 13 and 14, 700 insurance agents arrived in Washington from towns across America and fanned through the Capitol. Meeting with virtually every member of Congress, they leaned especially hard on freshman Republicans, many of whom were small-business owners themselves. After returning home, the agents visited their representatives' local offices, delivering the same message: They needed protection from banks.
It was too stark a show of political muscle for Mr. Gingrich to ignore. The June 12 meeting in his second-floor conference room in the Capitol took place on a drizzly afternoon, but the Speaker was in sunny spirits. He had just held his first and only debate with President Clinton the previous day, at a New Hampshire center for older citizens, and while some fellow conservatives had accused him of being too conciliatory, he exulted about his performance.
But after chatting about that event, the participants -- Mr. Gingrich; Mr. Leach; Dick Armey, the majority leader from Texas; Gerald B. H.Solomon, the Rules Committee chairman from upstate New York, and Thomas J. Bliley Jr., the Commerce Committee chairman from Virginia -- turned to the issue of financial deregulation.
Mr. Gingrich got to the point: The bill would have to be amended to protect the insurance agents, or the House would never pass it.
Mr. Leach objected to the change, but did not fight hard. In the end, he agreed to it, so long as his committee could write the amendment.
With Mr. Gingrich's decision to favor one set of friends over another, the coalition to repeal Glass-Steagall began to spin apart. Though Mr. Leach later managed to shorten the moratorium on letting banks sell insurance from an indefinite ban to five years, bankers refused to go along with even that limit.
Their unhappiness boiled over two weeks ago. Top bankers from local trade groups in Texas and several other states told Washington lobbyists of the American Bankers Association that they could not accept the Glass-Steagall bill with the moratorium. Three days later, the association took the incongruous position of opposing the broad bill on financial deregulation it had long sought.
The effort to undo Glass-Steagall now faces serious obstacles. A bill pending in the Senate Banking Committee would allow banks to merge with securities firms, insurers or even industrial companies. A big bank like J. P. Morgan, for example, could rejoin Morgan Stanley, from which the act originally separated it. And, if it so chose, it could also merge with the Allstate Insurance Company and the Ford Motor Company. The House bill, the subject of most of the maneuvering this year, would let banks merge with securities firms but usually not with insurers or industrial companies.
Nobody in Congress or the Administration has been able to come up with a plan that satisfies all of the groups even some of the time.
"It's almost like a three-legged stool -- banking, securities and insurance -- and if you cut one leg off, the stool has a tendency to tip over," said Sam J. Baptista, the president of the Financial Services Council, a trade group here that favors broad financial deregulation.
There have even been divisions within the competing industries. For example, while large banks began the year as avid supporters, smaller banks joined insurance agents in opposing deregulation. They feared that the formation of giant financial conglomerates selling everything from certificates of deposit to stocks to insurance policies would drive them out of business.
But small banks ended up supporting the House bill, figuring that broader deregulation might otherwise pass. "There are far worse things out there," Kenneth A. Guenther, a lobbyist for small banks, said.
As the banking industry found out, sheer size and financial resources do not always translate into effective action. Political action committees linked to the American Bankers Association gave 57 percent more than the Independent Insurance Agents of America in the first half of this year, and three times as much in 1993 and 1994, according to the Center for Responsive Politics, a Washington group that tracks political donations.
While banks were split, insurance agents cast Glass-Steagall as a life-and-death question. Critics accuse the House Republican leaders of putting Mr. Leach in an impossible position by yielding to the agents' demands. "Given the kind of constraints that have been imposed on Chairman Leach from the outside, both from his leadership and from other chairmen, I don't know if there is any hope of getting financial modernization legislation moving," said John D. Hawke, the Treasury's Under Secretary for Domestic Finance.
Mr. Leach, though, is still pursuing a plan. Recently, he said that his next move was to separate the insurance provision from the rest of the bill and then try to attach the provision to other legislation, possibly a budget bill. The repeal, he said, of "Glass-Steagall without insurance is frankly in excellent shape."
With so many interest groups arguing, though, even some senior Republicans on the House Banking Committee say that members may find it hard to vote for repeal soon. "There is not a corresponding political benefit to doing any of this," said Representative Richard Baker, the Louisiana Republican who heads the House Banking subcommittee on securities. "There is only a negative."
KEY DATES
1933 many politicians blame the 1929 market crash and the ensuing depression on speculation by banks. The Glass-Steagall Act of 1933 bars banks from engaging in securities activities.
1960s-1970s Banks lobby Congress unsuccessfully for permission to reenter part of the municipal bond market.
1980s many new kinds of financial institutions compete to attract deposits, supply capital and sell investments. Bankers complain that thay are unfairly restrained by outdated rules. Regulators create a series of reforms for banks to trade securities, but Congress is slow to change the basic law.
1984 Senate passes a bill allowing banks to trade revenue bonds, mortgage-backed securities and commercial paper. Bill is defeated in House, partly because of insurance industry objections.
1988 Senate passes a bill allowing bank holding company affiliates to deal in all securities. The House Banking Committee bill also passes a bill, but not the full House.
1991 Bush Administration proposes a broad repeal, and House and Senate banking committees concur. Once again the full House defeats it, partly because of insurance industry opposition.
1995 The House Banking Committee again approves a broad repeal of Glass-Steagall, but retains a ban on bank mergers with insurance companies. A bill pending in Senate Banking Committee would allow banks to merge with securities firms, insurers and industrial companies. Efforts to settle the issue bog down.
=<span class="time" style="margin: 0px 0px 20px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-weight: 600; font-stretch: inherit; line-height: inherit; vertical-align: baseline; text-transform: uppercase; display: block; -webkit-font-smoothing: antialiased; text-align: start;"><time style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline;">MAY 7, 2019</time><h1 class="video-page-title" itemprop="name" style="margin: 0px 0px 5px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; -webkit-font-smoothing: antialiased; background-color: rgb(255, 255, 255);">The Unlikely Reformer</h1><div class="initial" style="margin: 0px 0px 20px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; line-height: 1.3; vertical-align: baseline; background-color: rgb(255, 255, 255);"><p style="margin: 0px 0px 20px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; line-height: 1.3em; vertical-align: baseline; display: inline;"><a href="https://www.c-span.org/person/?matthewfink" style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; transition: color 0.35s ease 0s; outline: 0px; text-decoration-line: none;">Matthew Fink </a>talked about the political career of former Senator and <a href="https://www.c-span.org/person/?carterglass" style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; line-height: inherit; vertical-align: baseline; transition: color 0.35s ease 0s; outline: 0px; text-decoration-line: none;">Treasury Secretary Carter Glass </a>(D-VA), co-sponsor of the 1933 Banking Act, also known as the Glass-Steagall Act.</div><div class="initial" style="margin: 0px 0px 20px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; line-height: 1.3; vertical-align: baseline; background-color: rgb(255, 255, 255);"><p style="margin: 0px 0px 20px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; line-height: 1.3em; vertical-align: baseline; display: inline;">book tv</div>No Glass-Steagall Reinstatement, More DeregulationThe idea of reinstating the Glass-Steagall Act of 1933 featured in both the Democratic and the Republican National Committees’ platforms during the campaign season. But Trump’s treasury secretary, Steven Mnuchin, made it clear multiple times there would be no such push from the administration, arguing against doing so before senators including Elizabeth Warren and Bernie Sanders.To emphasize his disdain for regulation and oversight, Mnuchin also pushed the Financial Stability Oversight Council, over which he presides, to vote 6 to 3 to rescindAmerican International Group’s designation as posing a potential threat to the U.S. financial system. Thus, AIG will no longer be <a href="https://www.chicagotribune.com/business/sns-bc-us--aig-systemic-risk-20170929-story.html" target="blank" style="text-decoration-line: none; font-weight: bold; outline: none;">paying penance for its role</a> at the epicenter of the last financial crisis by filing regular risk reports anymore. Federal Reserve Chair Janet Yellen also supported the move.In a major blow to citizen security, Richard Cordray, the Obama-appointed regulator, <a href="https://www.washingtonpost.com/news/business/wp/2017/11/15/richard-cordray-is-stepping-down-as-head-of-consumer-financial-protection-bureau/?utm_term=.e0a7758f5b64" target="blank" style="text-decoration-line: none; font-weight: bold; outline: none;">resigned as director</a> of the Consumer Financial Protection Bureau in November.Consumer Financial Protection Bureau BashingDuring his six years at the helm of the CFPB, which the Dodd-Frank Act formed in 2011, the 1,600-person regulatory entity <a href="https://www.consumerfinance.gov/" target="blank" style="text-decoration-line: none; font-weight: bold; outline: none;">accomplished a lot</a>. It has provided $11.9 billion in relief to consumers for enforcement actions affecting more than 29.1 million people, handled 1.2 million consumer complaints and garnered timely responses on concerns for 97 percent of consumers.Still, Trump appointed White House budget director Mick Mulvaney to the post that Cordray vacated. Remember: Mulvaney as a congressman <a href="https://www.businessinsider.com/trump-names-mulvaney-to-cfpb-wants-to-tear-agency-apart-2017-11" target="blank" style="text-decoration-line: none; font-weight: bold; outline: none;">wasn’t a fan of protecting consumers</a>. “I don’t like the fact that [the] CFPB exists,” he said. “I will be perfectly honest with you.”Over at the Office of the Comptroller of the Currency (OCC), Joseph Otting, Mnuchin’s former partner in the takeover of IndyMac and subsequent flurry of foreclosures, was confirmed to the top position. In that spot, Otting will be able to help the Trump administration dial back more post-crisis bank regulations.phil gramm (enron) 1999 finance mod act; linked banks and insurance to wall st.  1998 citi said wanted to buy travelers ins. ignored rules, paid $300M in lobbying,  r cmfa, also hass enron loophole to exempt from oversight eg to exclude derivs from regs gramm head of sen bank comm, slipped amend on deriv? into big appropriation bill; wife, ex head of commodity Fut exge, joined enron bd to head AUDIT committee=d) Winthrop Aldrich from ChaseThough both Perkins and Aldrich met with FDR at the White House to discuss their support for passage of the Glass-Steagall Act, it was Winthrop Aldrich that took the most active role in supporting the strongest possible version of the Act, at the request of FDR.-----eliz warren bill to re-est <a href="http://www.warren.senate.gov/files/documents/21stCenturyGlassSteagall.pdf">http://www.warren.senate.gov/files/documents/21stCenturyGlassSteagall.pdf</a>
--ted cruz 2016:Republicans, you will be happy to know that the guy who is the sober alternative to Donald Trump is being advised on economic policy by <a href="http://trailblazersblog.dallasnews.com/2016/03/ted-cruz-snags-endorsement-from-a-role-model-former-u-s-senator-phil-gramm.html/" style="box-sizing: border-box; text-decoration-line: none;">the guy</a> who helped lay the groundwork for most recent total collapse of the global economy.Ted Cruz this week decided that one of his senior economic advisers will be former Texas Senator Phil Gramm—90s kids remember Phil Gramm! Looks like an old mouse and hates Bill Clinton? Yep, that’s the guy. He also has a long track record of opposing government regulation of Wall Street: “The distinguishing feature of Gramm’s career in public service is hostility to regulation<a href="http://www.latimes.com/business/hiltzik/la-fi-hiltzik-cruz-gramm-20160321-snap-htmlstory.html" style="box-sizing: border-box; text-decoration-line: none;"> in almost every form.</a>”Cruz is aligning himself here with a man whose actions were one of the direct causes of the 2008 financial crisis. Gramm <a href="https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act" style="box-sizing: border-box; text-decoration-line: none;">played a key role</a> in repealing the Glass-Steagall Act, thereby allowing huge banks to start gambling with everyone’s money, which threw the global financial system into chaos when the bets went bad in 2008. Thank you for that Phil! As if that’s not enough, Gramm also ensured that the government did not regulate derivatives, the wildly abused financial instruments that made the crisis so, so much worse. Thank you for that also, Phil! <a href="http://www.bloombergview.com/articles/2016-03-23/cruz-seeks-economic-wisdom-in-the-wrong-place" style="box-sizing: border-box; text-decoration-line: none;">Barry Ritholtz explains</a>:<blockquote style="box-sizing: border-box; padding: 14px; max-width: 636px; margin: 0px auto 1.5rem;">The damage caused by rolling back Glass-Steagall pales compared with what resulted from the <a href="https://www.congress.gov/bill/106th-congress/house-bill/5660" style="box-sizing: border-box; text-decoration-line: none;">Commodity Futures Modernization Act of 2000</a>. Gramm was a co-sponsor of the legislation, which exempted many derivatives and swaps from regulation. Not only was the law problematic, but it veered into potential conflict-of-interest territory.At the time the legislation was under consideration, Gramm’s wife, Wendy, was on the board of Enron, which as we now know was one of the greatest accounting fiascos in history... At Wendy Gramm’s urging, then-Senator Gramm inserted what became known as <a href="http://www.nytimes.com/2008/11/17/business/17grammside.html?r=0" style="box-sizing: border-box; text-decoration-line: none;">the Enron loophole</a> into the Commodity Futures Modernization Act. This allowed Enron to avoid most regulation in its energy-trading business. Enron, coincidentally, was a major campaign <a href="https://www.opensecrets.org/politicians/summary.php?cid=N00005709&cycle=Career" style="box-sizing: border-box; text-decoration-line: none;">contributor</a> to the senator.</blockquote>So, Ted Cruz has selected as an economic adviser a man who was a direct cause of the global financial crisis and helped to blow up Enron, as well as being thoroughly corrupt.  http://gawker.com/ted-cruzs-economic-adviser-guy-who-was-a-direct-cause-1766810897=<div>no link</div><div>
<div><div> former CEO of Citigroup just admitted to a huge mistake.</div><div>
</div><div>In an op-ed published in the Financial Times, John Reed says large banks like the one he used to run are now "inherently unstable and unworkable."</div><div>
</div><div>The man who was one of the chief architects of the "Big Bank" model now says the United States never should have repealed the Glass-Steagall banking act in 1999.</div><div>
</div><div>That's exactly what Democratic presidential hopefuls Bernie Sanders and Martin O'Malley have been arguing on the campaign trail. They want the law reinstated. Hillary Clinton and the Republican candidates do not.</div><div>
</div><div>As CEO of Citi (C)from 1984 to 2000, Reed was one of the main lobbyists advocating Congress and President Bill Clinton to get rid of the Glass-Steagall Act. It had been in place since the Great Depression, and it prohibited banks from doing both investment banking (Wall Street activities like selling stocks and bonds) and retail banking (checking and savings accounts targeted at Main Street).</div><div>
</div><div>But Reed wanted Citi to merge with Travelers Group, an insurance company. For that, he needed the law repealed.</div><div>
</div><div>"We were wrong about some things, and others we failed to anticipate," Reed wrote Thursday, the 16th anniversary of the end of Glass-Steagall.</div><div>
</div><div>Related: What the heck is the controversial Glass-Steagall Act?</div><div>
</div><div>He spells out the two biggest flaws:</div><div>
</div><div>1. Big banks aren't more efficient.</div><div>
</div><div>His exact wording is: "One was the belief that combining all types of finance into one institution would drive costs down — and the larger the institution the more efficient it would be. We now know that there are very few cost efficiencies that come from the merger of functions — indeed, there may be none at all."</div><div>
</div><div>2. Big banks have bad cultures.</div><div>
</div><div>"The second thing we were wrong about has to do with culture — and this turns out to be very serious. Mixing incompatible cultures is a problem all by itself. It makes the entire finance industry more fragile," he wrote.</div><div>
</div><div>Related: The No. 1 'too big to fail' bank is...</div><div>
</div><div>Dimon is not afraid of Bernie [vid]</div><div>
</div><div>Reed's U-turn on Glass-Steagall comes after another former Citigroup CEO and chairman Sandy Weill did the same in 2012.</div><div>
</div><div>Weill suggested that big banks be broken up "so that the taxpayer will never be at risk," in an interview with CNBC.</div><div>
</div><div>But many -- including Bill and Hillary Clinton -- are pushing back against the notion that the repeal of Glass-Steagall caused the crisis or made the financial system worse.</div><div>
</div><div>JPMorgan Chase (JPM)is now America's largest bank. CEO Jamie Dimon points to all the services the bank provides to businesses and countries around the world.</div><div>
</div><div>"You need [big banks]," Dimon told CNNMoney's Cristina Alesci. "If you break them up, someone else is going to do it and they will be Chinese. If you think that's going to be good for the future of America, I beg to differ."</div><div>
</div><div>CNNMoney (New York)</div><div>
</div><div></div></div></div>Almost a decade after the financial crisis, financial regulators are warning Wall Street’s five biggest banks are STILL too big to fail.That means if there was another financial crisis today, taxpayers could still be on the hook for bailing out Wall Street’s risky bets.But in a surprising move, BOTH the Democratic and Republican parties included reinstating Glass-Steagall in their official party platforms this year.2We’re capitalizing on this momentum by joining a huge coalition of grassroots groups to demand Congress stop taxpayers’ hard-earned savings from being used to bail out risky Wall Street bets.<a rel="nofollow" target="blank" href="https://act.demandprogress.org/go/2513?t=2&akid=4422.3765554.jlMVX4" style="-webkit-padding-start: 0px; margin: 0px; padding: 0px; outline: none; background: transparent;">Tell Congressional leadership: It’s time for Congress to listen to working Americans and their own parties. Pass the bipartisan 21st Century Glass-Steagall Act!</a>Glass-Steagall was originally passed after the Great Depression to protect everyday Americans’ deposits and savings from being on the hook if a bank’s risky Wall Street bet fails.It created a firewall between boring retail banking – that consists of basic checking and savings accounts, and mortgages – and speculative investment banking.Before the law was gutted in the late 1990s, Glass-Steagall protected the investments and savings of ordinary Americans from the Wall Street casino for more than 60 years.And with Wall Street’s risk-taking growing by the day,3 we can’t trust banks to protect our interests when another big bet fails.<a rel="nofollow" target="blank" href="https://act.demandprogress.org/go/2513?t=3&akid=4422.3765554.jlMVX4" id="yui_3_16_0_ym19_1_1472063129820_6527" style="-webkit-padding-start: 0px; margin: 0px; padding: 0px; outline: none; background: transparent;">Tell leaders in Congress: Taxpayers should not be on the hook for Wall Street’s risky behavior. Pass the 21st Century Glass Steagall Act!</a>Reinstating Glass-Steagall is common-sense: since retail banking serves the 99% and risky investment banking serves the 1%, banks should not use the 99%’s money to bail out the 1%.As Senator Elizabeth Warren says: “The idea is pretty simple behind this one: if banks want to engage in high-risk trading — they can go for it, but they can't get access to ensured deposits and put the taxpayers on the hook for that reason.”4And that’s why there’s a growing bipartisan movement in the Senate to pass the 21st Century Glass-Steagall Act (S.1709)5 after November’s election.8/16=usnewsJames Rickards is a hedge fund manager in New York City and the author of Currency Wars: The Making of the Next Global Crisis from Portfolio/Penguin. Follow him on Twitter at <a href="https://twitter.com/#%21/JamesGRickards" style="text-decoration: none;">@JamesGRickards</a>.The oldest propaganda technique is to repeat a lie emphatically and often until it is taken for the truth. Something like this is going on now with regard to banks and the financial crisis. The big bank boosters and analysts who should know better are repeating the falsehood that repeal of Glass-Steagall had nothing to do with the Panic of 2008.In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law that separated commercial and investment banking for seven decades. If there is any hope of avoiding another meltdown, it's critical to understand why Glass-Steagall repeal helped to cause the crisis. Without a return to something like Glass-Steagall, another greater catastrophe is just a matter of time.<div class="ndn_embed ndn_embedContainer ndn-widget-embed-2 ndn_embedding ndn-widget-embed-4" id="ndn-video-player-2" data-config-distributor-id="90080" data-config-site-section="ndn2_usnews" style="margin: 0px; padding: 0px; line-height: 21px;">History is a good place to begin. After the Depression of 1920-21, the United States embarked on a period of economic prosperity known as the Roaring Twenties. It was a time of innovation, especially in consumer goods such as automobiles, radio, and refrigeration. Along with these goods came new forms of consumer credit and bank expansion. National City Bank (forerunner of today's Citibank) and Chase Bank opened offices to sell securities side-by-side with traditional banking products like deposits and loans.[<a href="http://www.usnews.com/cartoons/economy-cartoons" style="text-decoration: none;">See a collection of political cartoons on the economy</a>.][pump and dump]As the decade progressed, the stock market boomed and eventually reached bubble territory. Along with the bubble came market manipulation in the form of organized pools that would ramp up the price of stocks and dump them on unsuspecting suckers just before the stock collapsed. Banks joined in by offering stocks of holding companies that were leveraged pyramid schemes and other securities backed by dubious assets.In 1929, the music stopped, the stock market crashed and the Great Depression began. It took eight years from the start of the boom to the bust. Subsequent investigations revealed the extent of the fraud that preceded the crash. In 1933, Congress passed Glass-Steagall in response to the abuses. Banks would be allowed to take deposits and make loans. Brokers would be allowed to underwrite and sell securities. But no firm could do both due to conflicts of interest and risks to insured deposits. From 1933 to 1999, there were very few large bank failures and no financial panics comparable to the Panic of 2008. The law worked exactly as intended.In 1999, Democrats led by President Bill Clinton and Republicans led by Sen. Phil Gramm joined forces to repeal Glass-Steagall at the behest of the big banks. What happened over the next eight years was an almost exact replay of the Roaring Twenties. Once again, banks originated fraudulent loans and once again they sold them to their customers in the form of securities. The bubble peaked in 2007 and collapsed in 2008. The hard-earned knowledge of 1933 had been lost in the arrogance of 1999.[<a href="http://www.usnews.com/opinion/mzuckerman/slideshows/five-sure-fire-ways-to-create-more-jobs" style="text-decoration: none;">See a slide show of Mort Zuckerman's 5 Ways to Create More Jobs</a>.]The bank supporters' attacks on this clear-as-a-bell narrative deserve a hearing to show how flimsy they are. One bank supporter says you cannot blame banks for fraudulent loan originations because that was done by unscrupulous mortgage brokers. This is nonsense. The brokers would not have been able to fund the loans in the first place if the banks had not been buying their production.Another apologist says the fact that no big banks failed in the crisis proves they were not the cause of the problem. This is also ludicrous. The reason the big banks did not fail was because they were bailed out by the government. Clearly the banks would have failed but for the bailouts. Bank balance sheets were neck-deep in liar loans and underwater home equity lines of credit. The fact that banks did not fail proves nothing except that they were too big to fail.Yet another big bank spokesman says that nonbanks such as Lehman and Bear Stearns were more to blame for the crisis. This ignores the fact that nonbanks get their funding from banks in the form of mortgages, repurchase agreements, and lines of credit. Without the big banks providing easy credit on bad collateral like structured products, the nonbanks would not have been able to leverage themselves.[<a href="http://www.usnews.com/news/slideshows/5-bright-spots-in-the-us-economy" style="text-decoration: none;">See a slide show of 5 bright spots in the U.S. economy</a>.]It is true that the financial crisis has enough blame to go around. Borrowers were reckless, brokers were greedy, rating agencies were negligent, customers were naïve, and government encouraged the fiasco with unrealistic housing goals and unlimited lines of credit at Fannie Mae and Freddie Mac.Yet, the fact that there were so many parties to blame should not be used to deflect blame from the most responsible parties of all—the big banks. Without the banks providing financing to the mortgage brokers and Wall Street while underwriting their own issues of toxic securities, the entire pyramid scheme would never have got off the ground.[<a href="http://www.usnews.com/news/slideshows/6-ways-to-fix-the-housing-market" style="text-decoration: none;">See a slide show of 6 ways to fix the housing market.</a>]It was Glass-Steagall that prevented the banks from using insured depositories to underwrite private securities and dump them on their own customers. This ability along with financing provided to all the other players was what kept the bubble-machine going for so long.Now, when memories are fresh, is the time to reinstate Glass-Steagall to prevent a third cycle of fraud on customers. Without the separation of banking and underwriting, it's just a matter of time before banks repeat their well-honed practice of originating garbage loans and stuffing them down customers' throats. Congress had the answer in 1933. Congress lost its way in 1999. Now is the chance to get back to the garden.<a href="http://www.slate.com/articles/business/moneybox/2008/09/shattering_the_glasssteagall.html">http://www.slate.com/articles/business/moneybox/2008/09/shattering_the_glasssteagall.html</a>daniel gross better faster...<div class="text text-1 parbase section" style="line-height: 21px; background-color: rgb(255, 255, 255);">Aside from signaling the end of an era for Lehman Brothers and Merrill Lynch, this weekend's activity definitively drew a line at the end of another historical era: the Age of Glass-Steagall.</div><div class="section authorbox" style="line-height: 21px;"><div class="text-2 text parbase section" style="line-height: 21px;">The <a data-linktype="External" href="http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html" target="blank" style="background-color: rgb(255, 255, 255); text-decoration: none;">Glass-Steagall Act</a> is the Depression-era law that separated commercial and investment banking. It was functionally repealed in 1998, when Travelers (the parent company of Salomon Smith Barney) acquired Citicorp. And it was officially repealed in 1999. But recent events on Wall Street—the failure or sale of three of the five largest independent investment banks—have effectively turned back the clock to the 1920s, when investment banks and commercial banks cohabited under the same corporate umbrella.</div><div class="text-3 text parbase section" style="line-height: 21px; background-color: rgb(255, 255, 255);">Glass-Steagall was one of the many necessary measures taken by Franklin Delano Roosevelt and the Democratic Congress to deal with the Great Depression. Crudely speaking, in the 1920s commercial banks (the types that took deposits, made construction loans, etc.) recklessly plunged into the bull market, making margin loans, underwriting new issues and investment pools, and trading stocks. When the bubble popped in 1929, exposure to Wall Street helped drag down the commercial banks. In the absence of deposit insurance and other backstops, the results were devastating. Wall Street's failure helped destroy Main Street.</div><div class="text parbase text-4 section" style="line-height: 21px;">The policy response was to erect a wall between investment banking and commercial banking. It outlasted the Berlin Wall by a few decades. In the 1990s, as another bull market took hold, momentum built to overturn Glass-Steagall. Commercial banks were eager to get into high-margin businesses like underwriting hot tech stocks. Brokerage firms saw commercial banks, with their massive customer bases, as great distribution channels for stocks, mutual funds, and other financial products that they created. Generally speaking, the investment banks were the aggressors. In April 1998, Sandy Weill's Travelers, which owned Salomon Smith Barney, merged with Citicorp. The following year, Congress passed and President Clinton signed the <a data-linktype="External" href="http://banking.senate.gov/conf/" target="blank" style="background-color: rgb(255, 255, 255); text-decoration: none;">Financial Services Modernization Act of 1999</a>, known as the Gramm-Leach-Bliley Act. This law effectively deleted the prohibition on commercial banks owning investment banks and vice versa.</div><div class="text parbase text-5 section" style="line-height: 21px;">Since then, the two industries have come together to a degree. And generally, the investment banks, which weren't subject to regulation by the Federal Reserve and didn't have to adhere to stodgy capital requirements, have been the alpha dogs. In 2000, the investment banking firm J.P. Morgan <a data-linktype="External" href="http://www.jpmorganchase.com/cm/cs?pagename=Chase/Href&urlname=jpmc/about/history" target="blank" style="text-decoration: none;">bought</a> commercial bank Chase. Commercial banks like Bank of America and Wachovia have tried to build up their own investment-banking operations, but they haven't had much success in eating into the core franchises of the five big independent investment banks: Merrill Lynch, Goldman Sachs, Morgan Stanley, Lehman Brothers, and Bear Stearns.</div><div class="text text-6 parbase section" style="line-height: 21px; background-color: rgb(255, 255, 255);">Up until the summer of 2007, the debt-powered independent broker-dealers who minted money with stock brokering, proprietary trading, and advising on mergers and acquisitions looked set to leave boring commercial banks in their dust. But 2008 has been another story. In March, faltering Bear Stearns was <a data-linktype="External" href="http://investor.shareholder.com/jpmorganchase/press/releasedetail.cfm?ReleaseID=299805" target="blank" style="text-decoration: none;">swallowed</a> by JPMorgan Chase. Lehman has gone bankrupt. Now the investment bank with the largest brokerage force, Merrill Lynch, is <a data-linktype="External" href="http://newsroom.bankofamerica.com/index.php?s=press_releases&item=8255" target="blank" style="text-decoration: none;">being bought</a> by Bank of America. The historic democratizer of stock ownership will henceforth be owned by the historic democratizer of credit.</div><div class="text parbase text-7 section" style="line-height: 21px;">And then there were two: Goldman Sachs (Wall Street's last great partnership until it went public a few years ago) and <a data-linktype="External" href="http://www.morganstanley.com/" target="blank" style="text-decoration: none;">Morgan Stanley</a> (a portion of the House of Morgan that was <a data-linktype="External" href="http://www.morganstanley.com/about/company/history.html" target="blank" style="text-decoration: none;">set up</a> as an independent entity after Glass-Steagall). But there are now <a data-linktype="External" href="http://www.marketwatch.com/news/story/fate-remaining-big-brokers-focus/story.aspx?guid=%7BBB47D94C%2D93CE%2D43D8%2D8A74%2D0D12F9EBA693%7D&siteid=yhoof" target="blank" style="text-decoration: none; background-color: rgb(255, 255, 255);">doubts</a> as to whether even these titans can survive as independents. The reason: In the wake of the global credit crunch, the investments banks' 2006 source of relative strength has become a major 2008 weakness. Investment banks are creatures of the global capital markets. They can borrow seemingly unlimited amounts of funds from investors around the world and deploy them as they see fit. By contrast, fuddy-duddy commercial banks, which borrowed money from their depositors, from the Federal Reserve, and from outfits like the Federal Home Loan Banks, accepted greater restrictions on the amount of leverage they could use. Between 2001 and 2006, that meant investment banks were better businesses to own than commercial banks. In today's climate, that means highly leveraged independent investment banks now face continuing struggles to finance their operations while less-leveraged commercial banks enjoy relatively stable sources of capital. The alpha dogs have essentially turned tail and are now scared of their own shadows. After today's press conference announcing the sale of once-proud Merrill Lynch to Bank of America, Merrill CEO John Thain, one of the biggest shots on Wall Street in the last decade, practically scurried—scurried!—away as a reporter called out to bid him farewell and wish him luck.The Glass–Steagall legislation describes four provisions of the <a href="https://en.wikipedia.org/wiki/United_States" title="United States" style="text-decoration-line: none; background: none;">U.S.</a> <a href="https://en.wikipedia.org/wiki/Banking_Act_of_1933" class="mw-redirect" title="Banking Act of 1933" style="text-decoration-line: none; background: none;">Banking Act of 1933</a> separating commercial and <a href="https://en.wikipedia.org/wiki/Investment_banking" title="Investment banking" style="text-decoration-line: none; background: none;">investment</a> banking.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-name-1" style="text-decoration-line: none; background: none;">[1]</a> The article <a href="https://en.wikipedia.org/wiki/1933_Banking_Act" title="1933 Banking Act" style="text-decoration-line: none; background: none;">1933 Banking Act</a> describes the entire law, including the legislative history of the provisions covered here.(The common name comes from the names of the Congressional sponsors, Senator <a href="https://en.wikipedia.org/wiki/Carter_Glass" title="Carter Glass" style="text-decoration-line: none; background: none;">Carter Glass</a> and Representative <a href="https://en.wikipedia.org/wiki/Henry_B.Steagall" title="Henry B. Steagall" style="text-decoration-line: none; background: none;">Henry B. Steagall</a>.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-2" style="text-decoration-line: none; background: none;">[2]</a> A separate 1932 law described in the article <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act_of_1932" title="Glass–Steagall Act of 1932" style="text-decoration-line: none; background: none;">Glass–Steagall Act of 1932</a> had the same sponsors, and is also referred to as the Glass–Steagall Act.)The separation of commercial and investment banking prevented securities firms and investment banks from taking deposits, and commercial Federal Reserve member banks from:<ul style="margin: 0.3em 0px 0px 1.6em; padding: 0px; list-style-image: url(" data:image="data:image" svg="svg" xml="xml" csvg="Csvg" width="%225%22" height="%2213%22%3E" ccircle="Ccircle" cx="%222.5%22" cy="%229.5%22" r="%222.5%22" fill="%22%2300528c%22/%3E" c="C" e="E" background-color="background-color" rgb="rgb" xmlns="%22http://www.w3.org/2000/svg%22" xmlns:data="data"><li style="margin-bottom: 0.1em;">dealing in non-governmental securities for customers,</li><li style="margin-bottom: 0.1em;">investing in non-investment grade securities for themselves,</li><li style="margin-bottom: 0.1em;">underwriting or distributing non-governmental securities,</li><li style="margin-bottom: 0.1em;">affiliating (or sharing employees) with companies involved in such activities.</li></ul>Starting in the early 1960s, federal banking regulators' interpretations of the Act permitted <a href="https://en.wikipedia.org/wiki/Commercial_banks" class="mw-redirect" title="Commercial banks" style="text-decoration-line: none; background: none;">commercial banks</a>, and especially commercial bank affiliates, to engage in an expanding list and volume of securities activities.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-uphold-3" style="text-decoration-line: none; background: none;">[3]</a>Congressional efforts to "repeal the Glass–Steagall Act", referring to those four provisions (and then usually to only the two provisions that restricted affiliations between commercial banks and securities firms),<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-repeal-4" style="text-decoration-line: none; background: none;">[4]</a>culminated in the 1999 <a href="https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act" title="Gramm–Leach–Bliley Act" style="text-decoration-line: none; background: none;">Gramm–Leach–Bliley Act</a> (GLBA), which repealed the two provisions restricting affiliations between banks and securities firms.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-GLBA-5" style="text-decoration-line: none; background: none;">[5]</a>By that time, many commentators argued Glass–Steagall was already "dead".<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-dead-6" style="text-decoration-line: none; background: none;">[6]</a> Most notably, <a href="https://en.wikipedia.org/wiki/Citibank" title="Citibank" style="text-decoration-line: none; background: none;">Citibank</a>'s 1998 affiliation with <a href="https://en.wikipedia.org/wiki/Salomon_Smith_Barney" class="mw-redirect" title="Salomon Smith Barney" style="text-decoration-line: none; background: none;">Salomon Smith Barney</a>, one of the largest US securities firms, was permitted under the <a href="https://en.wikipedia.org/wiki/Federal_Reserve_Board" class="mw-redirect" title="Federal Reserve Board" style="text-decoration-line: none; background: none;">Federal Reserve Board</a>'s then existing interpretation of the Glass–Steagall Act.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-Citi-7" style="text-decoration-line: none; background: none;">[7]</a> In November 1999, President <a href="https://en.wikipedia.org/wiki/Bill_Clinton" title="Bill Clinton" style="text-decoration-line: none; background: none;">Bill Clinton</a> publicly declared "the Glass–Steagall law is no longer appropriate".<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-8" style="text-decoration-line: none; background: none;">[8]</a><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-9" style="text-decoration-line: none; background: none;">[9]</a>Some commentators have stated that the GLBA's repeal of the affiliation restrictions of the Glass–Steagall Act was an important cause of the <a href="https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932008" title="Financial crisis of 2007–2008" style="text-decoration-line: none; background: none;">financial crisis of 2007–2008</a>. Economics Nobel prize laureate Joseph Stiglitz, for instance, argued that "[w]hen repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top" <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-Kuttner-10" style="text-decoration-line: none; background: none;">[10]</a><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-:0-11" style="text-decoration-line: none; background: none;">[11]</a> Economists at the Federal Reserve, such as Chairman of the Fed Ben Bernanke, have argued that the activities linked to the financial crisis were not prohibited (or, in most cases, even regulated) by the Glass–Steagall Act.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-W&M-12" style="text-decoration-line: none; background: none;">[12]</a><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-13" style="text-decoration-line: none; background: none;">[13]</a><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-:1-14" style="text-decoration-line: none; background: none;">[14]</a><div id="toc" class="toc" style="border: 1px solid rgb(162, 169, 177); background-color: rgb(248, 249, 250); padding: 7px; display: table; zoom: 1;"><div class="toctitle" lang="en" dir="ltr" xml:lang="en" style="direction: ltr; text-align: center;" xmlns:xml="xml">
</div><ul style="list-style-type: none; margin: 0.3em 0px; padding: 0px; list-style-image: none;"><li class="toclevel-1 tocsection-1" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Sponsors" style="text-decoration-line: none; background: none;">1Sponsors</a></li><li class="toclevel-1 tocsection-2" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Legislative_history" style="text-decoration-line: none; background: none;">2Legislative history</a></li><li class="toclevel-1 tocsection-3" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Separating_commercial_and_investment_banking" style="text-decoration-line: none; background: none;">3Separating commercial and investment banking</a></li><li class="toclevel-1 tocsection-4" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Decline_and_repeal" style="text-decoration-line: none; background: none;">4Decline and repeal</a></li><li class="toclevel-1 tocsection-5" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Aftermath_of_repeal" style="text-decoration-line: none; background: none;">5Aftermath of repeal</a></li><li class="toclevel-1 tocsection-6" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Post-financial_crisis_reform_debate" style="text-decoration-line: none; background: none;">6Post-financial crisis reform debate</a></li><li class="toclevel-1 tocsection-7" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#See_also" style="text-decoration-line: none; background: none;">7See also</a></li><li class="toclevel-1 tocsection-8" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Notes" style="text-decoration-line: none; background: none;">8Notes</a></li><li class="toclevel-1 tocsection-9" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#References" style="text-decoration-line: none; background: none;">9References</a></li><li class="toclevel-1 tocsection-10" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#Further_reading" style="text-decoration-line: none; background: none;">10Further reading</a></li><li class="toclevel-1 tocsection-11" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#External_links" style="text-decoration-line: none; background: none;">11External links</a></li></ul></div><h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Sponsors[<a href="https://en.wikipedia.org/w/index.php?title=Glass%E2%80%93Steagall_legislation&action=edit&section=1" title="Edit section: Sponsors" style="text-decoration-line: none; background: none;">edit</a>]</h2><div class="thumb tright" style="clear: right; float: right; margin: 0.5em 0px 1.3em 1.4em; width: auto; background-color: rgb(255, 255, 255);"><div class="thumbinner" style="min-width: 100px; border: 1px solid rgb(200, 204, 209); padding: 3px; background-color: rgb(248, 249, 250); text-align: center; overflow: hidden; width: 302px;">
<div class="thumbcaption" style="border: 0px; line-height: 1.4em; padding: 3px; text-align: left;"><div class="magnify" style="float: right; margin-left: 3px; margin-right: 0px;"><a href="https://en.wikipedia.org/wiki/File:GlassSteagall.jpg" class="internal" title="Enlarge" style="text-decoration-line: none; background: linear-gradient(transparent, transparent), url(" data:image="data:image" svg="svg" xml="xml" csvg="Csvg" viewbox="%220" width="width" height="height" cg="Cg" id="%22smallbox%22" fill="%22%23fff%22" stroke="%22%23000%22%3E" cpath="Cpath" d="%22M-1.499" h10.99v7.919h-10.99z="h10.99v7.919h-10.99z" e="E" h5.943v4.904h-5.943z="h5.943v4.904h-5.943z" c="C" g="g" display="display" block="block" text-indent="text-indent" px="px" white-space="white-space" nowrap="nowrap" overflow="overflow" hidden="hidden" user-select="user-select" none="none" xmlns="%22http://www.w3.org/2000/svg%22" xmlns:data="data" /></div><a href="https://en.wikipedia.org/wiki/File:GlassSteagall.jpg" class="internal" title="Enlarge" style="text-decoration-line: none; background: linear-gradient(transparent, transparent), url(" data:image="data:image" svg="svg" xml="xml" csvg="Csvg" viewbox="%220" width="width" height="height" cg="Cg" id="%22smallbox%22" fill="%22%23fff%22" stroke="%22%23000%22%3E" cpath="Cpath" d="%22M-1.499" h10.99v7.919h-10.99z="h10.99v7.919h-10.99z" e="E" h5.943v4.904h-5.943z="h5.943v4.904h-5.943z" c="C" g="g" display="display" block="block" text-indent="text-indent" px="px" white-space="white-space" nowrap="nowrap" overflow="overflow" hidden="hidden" user-select="user-select" none="none" xmlns="%22http://www.w3.org/2000/svg%22" xmlns:data="data"></a><a href="https://en.wikipedia.org/wiki/United_States_Senate" title="United States Senate" style="text-decoration-line: none; background: none;">Sen.</a> <a href="https://en.wikipedia.org/wiki/Carter_Glass" title="Carter Glass" style="text-decoration-line: none; background: none;">Carter Glass</a> (<a href="https://en.wikipedia.org/wiki/Democratic_Party(United_States)" title="Democratic Party (United States)" style="text-decoration-line: none; background: none;">D</a>–<a href="https://en.wikipedia.org/wiki/List_of_United_States_Senators_from_Virginia" title="List of United States Senators from Virginia" style="text-decoration-line: none; background: none;">Va.</a>) and <a href="https://en.wikipedia.org/wiki/United_States_House_of_Representatives" title="United States House of Representatives" style="text-decoration-line: none; background: none;">Rep.</a> <a href="https://en.wikipedia.org/wiki/Henry_B.Steagall" title="Henry B. Steagall" style="text-decoration-line: none; background: none;">Henry B. Steagall</a> (<a href="https://en.wikipedia.org/wiki/Democratic_Party(United_States)" title="Democratic Party (United States)" style="text-decoration-line: none; background: none;">D</a>–<a href="https://en.wikipedia.org/wiki/Alabama%27s_3rd_congressional_district" title="Alabama's 3rd congressional district" style="text-decoration-line: none; background: none;">Ala.-3</a>), the co-sponsors of the Glass–Steagall Act.</div></div></div>The sponsors of both the <a href="https://en.wikipedia.org/wiki/Banking_Act_of_1933" class="mw-redirect" title="Banking Act of 1933" style="text-decoration-line: none; background: none;">Banking Act of 1933</a> and the <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act_of_1932" title="Glass–Steagall Act of 1932" style="text-decoration-line: none; background: none;">Glass–Steagall Act of 1932</a> were <a href="https://en.wikipedia.org/wiki/Southern_Democrats" title="Southern Democrats" style="text-decoration-line: none; background: none;">southern Democrats</a>: Senator <a href="https://en.wikipedia.org/wiki/Carter_Glass" title="Carter Glass" style="text-decoration-line: none; background: none;">Carter Glass</a> of Virginia (who in 1932 had been in the House, Secretary of the Treasury, or in the Senate, for the preceding 30 years), and Representative <a href="https://en.wikipedia.org/wiki/Henry_B.Steagall" title="Henry B. Steagall" style="text-decoration-line: none; background: none;">Henry B. Steagall</a> of Alabama (who had been in the House for the preceding 17 years).<h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Legislative history[<a href="https://en.wikipedia.org/w/index.php?title=Glass%E2%80%93Steagall_legislation&action=edit&section=2" title="Edit section: Legislative history" style="text-decoration-line: none; background: none;">edit</a>]</h2><div role="note" class="hatnote navigation-not-searchable" style="font-style: italic; padding-left: 1.6em; margin-bottom: 0.5em; background-color: rgb(255, 255, 255);">Main article: <a href="https://en.wikipedia.org/wiki/1933_Banking_Act" title="1933 Banking Act" style="text-decoration-line: none; background: none;">1933 Banking Act</a></div>Between 1930 and 1932 Senator Carter Glass (D-VA) introduced several versions of a bill (known in each version as the Glass bill) to regulate or prohibit the combination of commercial and investment banking and to establish other reforms (except deposit insurance) similar to the final provisions of the 1933 Banking Act.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-15" style="text-decoration-line: none; background: none;">[15]</a> On June 16, 1933, President Roosevelt signed the bill into law. Glass originally introduced his banking reform bill in January 1932. It received extensive critiques and comments from bankers, economists, and the Federal Reserve Board. It passed the Senate in February 1932, but the House adjourned before coming to a decision. The Senate passed a version of the Glass bill that would have required commercial banks to eliminate their securities affiliates.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-16" style="text-decoration-line: none; background: none;">[16]</a>The final Glass–Steagall provisions contained in the 1933 Banking Act reduced from five years to one year the period in which commercial banks were required to eliminate such affiliations.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-17" style="text-decoration-line: none; background: none;">[17]</a> Although the deposit insurance provisions of the 1933 Banking Act were very controversial, and drew veto threats from President <a href="https://en.wikipedia.org/wiki/Franklin_Delano_Roosevelt" class="mw-redirect" title="Franklin Delano Roosevelt" style="text-decoration-line: none; background: none;">Franklin Delano Roosevelt</a>, President Roosevelt supported the Glass–Steagall provisions separating commercial and investment banking, and Representative Steagall included those provisions in his House bill that differed from Senator Glass's Senate bill primarily in its deposit insurance provisions.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-18" style="text-decoration-line: none; background: none;">[18]</a> Steagall insisted on protecting small banks while Glass felt that small banks were the weakness to U.S. banking.Many accounts of the Act identify the <a href="https://en.wikipedia.org/wiki/Pecora_Commission" title="Pecora Commission" style="text-decoration-line: none; background: none;">Pecora Investigation</a> as important in leading to the Act, particularly its Glass–Steagall provisions, becoming law.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-19" style="text-decoration-line: none; background: none;">[19]</a> While supporters of the Glass–Steagall separation of commercial and investment banking cite the Pecora Investigation as supporting that separation,<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-20" style="text-decoration-line: none; background: none;">[20]</a> Glass–Steagall critics have argued that the evidence from the Pecora Investigation did not support the separation of commercial and investment banking.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-21" style="text-decoration-line: none; background: none;">[21]</a>This source states that Senator Glass proposed many versions of his bill to Congress known as the Glass Bills in the two years prior to the Glass–Steagall Act being passed. It also includes how the deposit insurance provisions of the bill were very controversial at the time, which almost led to the rejection of the bill once again.The previous Glass Bills before the final revision all had similar goals and brought up the same objectives which were to separate commercial from investment banking, bring more banking activities under Federal Reserve supervision and to allow branch banking. In May 1933 Steagall's addition of allowing state chartered banks to receive federal deposit insurance and shortening the time in which banks needed to eliminate securities affiliates to one year was known as the driving force of what helped the Glass–Steagall act to be signed into law.<h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Separating commercial and investment banking[<a href="https://en.wikipedia.org/w/index.php?title=Glass%E2%80%93Steagall_legislation&action=edit&section=3" title="Edit section: Separating commercial and investment banking" style="text-decoration-line: none; background: none;">edit</a>]</h2><div role="note" class="hatnote navigation-not-searchable" style="padding-left: 1.6em; margin-bottom: 0.5em; background-color: rgb(255, 255, 255);">Main article: <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall:legislation,limits_and_loopholes" title="Glass–Steagall: legislation, limits and loopholes" style="text-decoration-line: none; background: none;">Glass–Steagall: legislation, limits and loopholes</a></div><div role="note" class="hatnote navigation-not-searchable" style="font-style: italic; padding-left: 1.6em; margin-bottom: 0.5em; background-color: rgb(255, 255, 255);">...</div><div role="note" class="hatnote navigation-not-searchable" style="padding-left: 1.6em; margin-bottom: 0.5em;"><h2 style="font-style: normal; background: none rgb(255, 255, 255); margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Decline and repeal</h2><div role="note" class="hatnote navigation-not-searchable" style="background-color: rgb(255, 255, 255); padding-left: 1.6em; margin-bottom: 0.5em;">Main article: <a href="https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93Steagall_Act" title="Decline of the Glass–Steagall Act" style="text-decoration-line: none; background: none;">Decline of the Glass–Steagall Act</a></div>It was not until 1933 that the separation of commercial banking and investment banking was considered controversial. There was a belief that the separation would lead to a healthier financial system.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-22" style="text-decoration-line: none; background: none;">[22]</a> As time passed, however, the separation became so controversial that in 1935, Senator Glass himself attempted to "repeal" the prohibition on direct bank underwriting by permitting a limited amount of bank underwriting of corporate debt.In the 1960s the <a href="https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_the_Currency" title="Office of the Comptroller of the Currency" style="text-decoration-line: none; background: none;">Office of the Comptroller of the Currency</a> issued aggressive interpretations of Glass–Steagall to permit national banks to engage in certain securities activities. Although most of these interpretations were overturned by court decisions, by the late 1970s bank regulators began issuing Glass–Steagall interpretations that were upheld by courts and that permitted banks and their affiliates to engage in an increasing variety of securities activities. Starting in the 1960s banks and non-banks developed financial products that blurred the distinction between banking and securities products, as they increasingly competed with each other.Separately, starting in the 1980s, Congress debated bills to repeal Glass–Steagall's affiliation provisions (Sections 20 and 32). In 1999 Congress passed the <a href="https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act" title="Gramm–Leach–Bliley Act" style="text-decoration-line: none; background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">Gramm–Leach–Bliley Act</a>, also known as the Financial Services Modernization Act of 1999,<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-23" style="text-decoration-line: none; background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">[23]</a> to repeal them. Eight days later, President <a href="https://en.wikipedia.org/wiki/Bill_Clinton" title="Bill Clinton" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">Bill Clinton</a> signed it into law.<h2 style="font-style: normal; background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Aftermath of repeal</h2><div role="note" class="hatnote navigation-not-searchable" style="background-color: rgb(255, 255, 255); padding-left: 1.6em; margin-bottom: 0.5em;">Main article: <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall:Aftermath_of_repeal" class="mw-redirect" title="Glass–Steagall: Aftermath of repeal" style="text-decoration-line: none; background: none;">Glass–Steagall: Aftermath of repeal</a></div>After the <a href="https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932008" title="Financial crisis of 2007–2008" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">financial crisis of 2007–2008</a>, some commentators argued that the repeal of Sections 20 and 32 had played an important role in leading to the housing bubble and financial crisis. <a href="https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences" title="Nobel Memorial Prize in Economic Sciences" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">Economics Nobel prize</a> laureate <a href="https://en.wikipedia.org/wiki/Joseph_Stiglitz" title="Joseph Stiglitz" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">Joseph Stiglitz</a>, for instance, argued that "[w]hen repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top", and banks which had previously been managed conservatively turned to riskier investments to increase their returns.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-:0-11" style="text-decoration-line: none; background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">[11]</a> Another laureate, <a href="https://en.wikipedia.org/wiki/Paul_Krugman" title="Paul Krugman" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">Paul Krugman</a>, contended that the repealing of the act "was indeed a mistake"; however, it was not the cause of the financial crisis.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-24" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">[24]</a>
<a href="https://www.nytimes.com/2015/10/16/opinion/democrats-republicans-and-wall-street-tycoons.html">https://www.nytimes.com/2015/10/16/opinion/democrats-republicans-and-wall-street-tycoons.html</a>[Hillary Clinton and Bernie Sanders had an argument about financial regulation during <a href="http://www.nytimes.com/2015/10/14/us/politics/democratic-debate-transcript.html" style="font-family: georgia, " times="times" new="new" roman="roman" serif="serif" font-size="font-size" rem="rem" color="color" rgb="rgb">Tuesday’s debate</a> — but it wasn’t about whether to crack down on banks. Instead, it was about whose plan was tougher. The contrast with Republicans like Jeb Bush or Marco Rubio, who have pledged to reverse even the moderate financial reforms enacted in 2010, couldn’t be stronger.<p class="story-body-text story-content" data-para-count="524" data-total-count="896" style="margin: 0px 0px 1em 75px; line-height: 1.625rem;" times="times" new="new" roman="roman" serif="serif" max-width="max-width" none="none" width="width" px="px" color="color" rgb="rgb" background-color="background-color">For what it’s worth, Mrs. Clinton had the better case. Mr. Sanders has been focused on restoring Glass-Steagall, the rule that separated deposit-taking banks from riskier wheeling and dealing. And repealing Glass-Steagall was indeed a mistake. But it’s not what caused the financial crisis, which arose instead from “shadow banks” like Lehman Brothers, which don’t take deposits but can nonetheless wreak havoc when they fail. Mrs. Clinton has laid out a <a href="http://www.vox.com/2015/10/8/9482521/hillary-clinton-financial-reform" style="">plan to rein in</a> shadow banks; so far, Mr. Sanders hasn’t.<p class="story-body-text story-content" data-para-count="524" data-total-count="896" style="margin: 0px 0px 1em 75px; line-height: 1.625rem;" times="times" new="new" roman="roman" serif="serif" max-width="max-width" none="none" width="width" px="px" color="color" rgb="rgb" background-color="background-color">]
Other commentators believed that these banking changes had no effect, and the financial crisis would have happened the same way if the regulations had still been in force.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-mitigate-25" style="text-decoration-line: none; background: none;">[25]</a> <a href="https://en.wikipedia.org/wiki/Lawrence_J.White" title="Lawrence J. White" style="text-decoration-line: none; background: none;">Lawrence J. White</a>, for instance, noted that "it was not [commercial banks'] investment banking activities, such as underwriting and dealing in securities, that did them in".<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-White-26" style="text-decoration-line: none; background: none;">[26]</a>At the time of the repeal, most commentators believed it would be harmless. Because the Federal Reserve's interpretations of the act had already weakened restrictions previously in place, commentators did not find much significance in the repeal, especially of sections 20 and 32.<a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legislation#cite_note-:1-14" style="text-decoration-line: none; background: none;">[14]</a> Instead, the five year anniversary of its repeal was marked by numerous sources explaining that the GLBA had not significantly changed the market structure of the banking and securities industries. More significant changes had occurred during the 1990s when commercial banking firms had gained a significant role in securities markets through "Section 20 affiliates".<h2 style="font-style: normal; background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Post-financial crisis reform debate</h2><div role="note" class="hatnote navigation-not-searchable" style="background-color: rgb(255, 255, 255); padding-left: 1.6em; margin-bottom: 0.5em;">Main article: <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_in_post-financial_crisis_reform_debate" title="Glass–Steagall in post-financial crisis reform debate" style="text-decoration-line: none; background: none;">Glass–Steagall in post-financial crisis reform debate</a></div>Following the financial crisis of 2007-2008, legislators unsuccessfully tried to reinstate Glass–Steagall Sections 20 and 32 as part of the <a href="https://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act" title="Dodd–Frank Wall Street Reform and Consumer Protection Act" style="background-image: none; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; text-decoration-line: none;">Dodd–Frank Wall Street Reform and Consumer Protection Act</a>. Both in the United States and elsewhere, banking reforms have been proposed that refer to Glass–Steagall principles. These proposals include issues of “ring fencing” commercial banking operations and <a href="https://en.wikipedia.org/wiki/Narrow_banking" title="Narrow banking" style="background: none; text-decoration-line: none;">narrow banking</a> proposals that would sharply reduce the permitted activities of commercial banks.<h2 style="font-style: normal; background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">See also</h2><ul style="background-color: rgb(255, 255, 255); margin: 0.3em 0px 0px 1.6em; padding: 0px; list-style-image: url(" data:image="data:image" svg="svg" xml="xml" csvg="Csvg" width="%225%22" height="%2213%22%3E" ccircle="Ccircle" cx="%222.5%22" cy="%229.5%22" r="%222.5%22" fill="%22%2300528c%22/%3E" c="C" e="E" font-style="font-style" normal="normal" xmlns="%22http://www.w3.org/2000/svg%22" xmlns:data="data"><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/American_International_Group" title="American International Group" style="text-decoration-line: none; background: none;">American International Group</a></li><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Arthur_H.Vandenberg" class="mw-redirect" title="Arthur H. Vandenberg" style="text-decoration-line: none; background: none;">Arthur H. Vandenberg</a></li><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000" title="Commodity Futures Modernization Act of 2000" style="text-decoration-line: none; background: none;">Commodity Futures Modernization Act of 2000</a></li><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Corporate_law" title="Corporate law" style="text-decoration-line: none; background: none;">Corporate law</a></li><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93Steagall_Act" title="Decline of the Glass–Steagall Act" style="text-decoration-line: none; background: none;">Decline of the Glass–Steagall Act</a></li><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Subprime_mortgage_crisis" title="Subprime mortgage crisis" style="text-decoration-line: none; background: none;">Subprime mortgage crisis</a></li><li style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Systemic_risk" title="Systemic risk" style="text-decoration-line: none; background: none;">Systemic risk</a></li></ul></div></div><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act">https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act</a>The <a href="https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act" class="mw-redirect" title="Glass–Steagall Act" style="text-decoration-line: none; background: none;">Glass–Steagall</a> legislation was enacted by the <a href="https://en.wikipedia.org/wiki/United_States_Congress" title="United States Congress" style="text-decoration-line: none; background: none;">United States Congress</a> in 1933 as part of the <a href="https://en.wikipedia.org/wiki/1933_Banking_Act" title="1933 Banking Act" style="text-decoration-line: none; background: none;">1933 Banking Act</a>, amended as part of the <a href="https://en.wikipedia.org/w/index.php?title=1935_Banking_Act&action=edit&redlink=1" class="new" title="1935 Banking Act (page does not exist)" style="text-decoration-line: none; background: none;">1935 Banking Act</a>, and most of it was repealed in 1999 by the <a href="https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act" title="Gramm–Leach–Bliley Act" style="text-decoration-line: none; background: none;">Gramm–Leach–Bliley Act</a> (GLBA). Its protections and restrictions had also been chipped away during most of its existence by lenient regulatory interpretations and use of loopholes. After Glass–Steagall's 1999 repeal, there was a great deal of discussion in the banking and securities industries, and among policymakers and economists, about the practical positive and negative changes to the business and consumer environment. Later, as financial crises and other issues played out in the United States and even worldwide, arguments have broken out about whether Glass–Steagall, as originally intended, would have prevented these issues.
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</div><ul style="margin: 0.3em 0px; padding: 0px; list-style-image: none; list-style-type: none;"><li class="toclevel-1 tocsection-1" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Commentator_response_to_Section_20_and_32_repeal" style="text-decoration-line: none; background: none;">1Commentator response to Section 20 and 32 repeal</a></li><li class="toclevel-1 tocsection-2" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Financial_industry_developments_after_repeal_of_Sections_20_and_32" style="text-decoration-line: none; background: none;">2Financial industry developments after repeal of Sections 20 and 32</a><ul style="margin: 0px 0px 0px 2em; padding: 0px; list-style-image: none; list-style-type: none;"><li class="toclevel-2 tocsection-3" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Citigroup_gives_up_insurance_underwriting" style="text-decoration-line: none; background: none;">2.1Citigroup gives up insurance underwriting</a></li><li class="toclevel-2 tocsection-4" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Banking,insurance,and_securities_industries_remain_structurally_unchanged" style="text-decoration-line: none; background: none;">2.2Banking, insurance, and securities industries remain structurally unchanged</a></li><li class="toclevel-2 tocsection-5" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Competition_between_commercial_banking_and_investment_banking_firms" style="text-decoration-line: none; background: none;">2.3Competition between commercial banking and investment banking firms</a></li></ul></li><li class="toclevel-1 tocsection-6" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Glass%E2%80%93Steagall%22repeal%22_and_the_financial_crisis" style="text-decoration-line: none; background: none;">3Glass–Steagall "repeal" and the financial crisis</a></li><li class="toclevel-1 tocsection-7" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#Notes" style="text-decoration-line: none; background: none;">4Notes</a></li><li class="toclevel-1 tocsection-8" style="margin-bottom: 0.1em;"><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#References" style="text-decoration-line: none; background: none;">5References</a></li></ul></div><h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Commentator response to Section 20 and 32 repeal[<a href="https://en.wikipedia.org/w/index.php?title=Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act&action=edit&section=1" title="Edit section: Commentator response to Section 20 and 32 repeal" style="text-decoration-line: none; background: none;">edit</a>]</h2>President <a href="https://en.wikipedia.org/wiki/Bill_Clinton" title="Bill Clinton" style="text-decoration-line: none; background: none;">Bill Clinton</a>'s signing statement for the GLBA summarized the established argument for repealing Glass–Steagall Section's 20 and 32 in stating that this change, and the GLBA's amendments to the Bank Holding Company Act, would "enhance the stability of our financial services system" by permitting financial firms to "diversify their product offerings and thus their sources of revenue" and make financial firms "better equipped to compete in global financial markets."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-1" style="text-decoration-line: none; background: none;">[1]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2002-2" style="text-decoration-line: none; background: none;">[2]</a>:223With Salomon Smith Barney already operating as a Section 20 affiliate of Citibank under existing law, commentators did not find much significance in the GLBA's repeal of Sections 20 and 32. Many commentators noted those sections "were dead" before the GLBA.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Lockner_2000_Citi-3" style="text-decoration-line: none; background: none;">[3]</a>:37<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Macey_2000-4" style="text-decoration-line: none; background: none;">[4]</a>:691–692,716–718<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2002-2" style="text-decoration-line: none; background: none;">[2]</a>:220,222The GLBA's amendment to the Bank Holding Company Act to permit banks to affiliate with insurance underwriting companies was a new power. Under a 1982 amendment to the Bank Holding Company Act bank affiliates had been prohibited from underwriting most forms of insurance.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-5" style="text-decoration-line: none; background: none;">[5]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:11 Because the GLBA permitted banks to affiliate with insurance underwriters, Citigroup was able to retain ownership of the Travelers insurance underwriting business.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Simpson_1998_Citi-7" style="text-decoration-line: none; background: none;">[7]</a> Overall, however, commentators viewed the GLBA "as ratifying and extending changes that had already been made, rather than as revolutionary."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-8" style="text-decoration-line: none; background: none;">[8]</a> At least one commentator found the entire GLBA "unnecessary" for banks and suggested the OCC had the authority to grant national banks all the insurance underwriting powers permitted to affiliates through the GLBA.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-9" style="text-decoration-line: none; background: none;">[9]</a>As John Boyd had earlier,<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Boyd-10" style="text-decoration-line: none; background: none;">[10]</a> Minneapolis Federal Reserve Bank president <a href="https://en.wikipedia.org/wiki/Gary_Stern" class="mw-redirect" title="Gary Stern" style="text-decoration-line: none; background: none;">Gary Stern</a> and Arthur Wilmarth warned that the GLBA's permission for broader combinations of banking, securities, and insurance activities could increase the "<a href="https://en.wikipedia.org/wiki/Too_big_to_fail" title="Too big to fail" style="text-decoration-line: none; background: none;">too big to fail</a>" problem.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-TBTF-11" style="text-decoration-line: none; background: none;">[11]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2001-12" style="text-decoration-line: none; background: none;">[12]</a>:22<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2002-2" style="text-decoration-line: none; background: none;">[2]</a>:224–225<h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Financial industry developments after repeal of Sections 20 and 32[<a href="https://en.wikipedia.org/w/index.php?title=Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act&action=edit&section=2" title="Edit section: Financial industry developments after repeal of Sections 20 and 32" style="text-decoration-line: none; background: none;">edit</a>]</h2><h3 style="background: none rgb(255, 255, 255); margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: 0px; line-height: 1.6;">Citigroup gives up insurance underwriting[<a href="https://en.wikipedia.org/w/index.php?title=Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act&action=edit&section=3" title="Edit section: Citigroup gives up insurance underwriting" style="text-decoration-line: none; background: none;">edit</a>]</h3>The GLBA permitted Citigroup to retain the Travelers property, casualty, and life insurance underwriting businesses beyond the five-year "divestiture" period the Federal Reserve Board could have permitted under the pre-GLBA form of the BHCA.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Simpson_1998_Citi-7" style="text-decoration-line: none; background: none;">[7]</a>:1–6<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Lockner_2000_Citi-3" style="text-decoration-line: none; background: none;">[3]</a>:37<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Macey_2000-4" style="text-decoration-line: none; background: none;">[4]</a>:718 Before that five-year period elapsed, however, Citigroup <a href="https://en.wikipedia.org/wiki/Corporate_spin-off" title="Corporate spin-off" style="text-decoration-line: none; background: none;">spun off</a> the Travelers property and casualty insurance business to Citigroup's shareholders.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-13" style="text-decoration-line: none; background: none;">[13]</a> In 2005 Citigroup sold to <a href="https://en.wikipedia.org/wiki/Metropolitan_Life" class="mw-redirect" title="Metropolitan Life" style="text-decoration-line: none; background: none;">Metropolitan Life</a> the Travelers life insurance business.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-divest-14" style="text-decoration-line: none; background: none;">[14]</a> Commentators noted that Citigroup was left with selling insurance underwritten by third parties, a business it could have conducted without the GLBA.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-15" style="text-decoration-line: none; background: none;">[15]</a><h3 style="background: none rgb(255, 255, 255); margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: 0px; line-height: 1.6;">Banking, insurance, and securities industries remain structurally unchanged[<a href="https://en.wikipedia.org/w/index.php?title=Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act&action=edit&section=4" title="Edit section: Banking, insurance, and securities industries remain structurally unchanged" style="text-decoration-line: none; background: none;">edit</a>]</h3>In November 2003 the Federal Reserve Board and the <a href="https://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury" title="United States Department of the Treasury" style="text-decoration-line: none; background: none;">Treasury Department</a> issued to Congress a report (Joint Report) on the activities of the "financial holding companies" (FHCs) authorized by the GLBA and the effect of mergers or acquisitions by FHCs on market concentration in the financial services industry.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:2 According to the Joint Report, 12% of all bank holding companies had qualified as financial holding companies to exercise the new powers provided by the GLBA, and those companies held 78% of all bank holding company assets.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:5 40 of the 45 bank holding companies with Section 20 affiliates before 2000 had qualified as financial holding companies, and their securities related assets had nearly doubled.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:9 The great majority of this increase was at non-U.S. based banks. Such foreign banking companies had acquired several medium-sized securities firms (such as <a href="https://en.wikipedia.org/wiki/UBS" title="UBS" style="text-decoration-line: none; background: none;">UBS</a> acquiring <a href="https://en.wikipedia.org/wiki/Paine_Webber" title="Paine Webber" style="text-decoration-line: none; background: none;">Paine Webber</a> and <a href="https://en.wikipedia.org/wiki/Credit_Suisse" title="Credit Suisse" style="text-decoration-line: none; background: none;">Credit Suisse</a> acquiring <a href="https://en.wikipedia.org/wiki/Donaldson,Lufkin%26_Jenrette" title="Donaldson, Lufkin & Jenrette" style="text-decoration-line: none; background: none;">Donaldson, Lufkin & Jenrette</a>).<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:9–10Despite these increases in securities activities by bank holding companies that qualified as financial holding companies, the Joint Report found that concentration levels among securities underwriting and dealing firms had not changed significantly since 1999.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:34–37<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-16" style="text-decoration-line: none; background: none;">[16]</a> Ranked by capital levels, none of the four largest securities dealing and underwriting firms was affiliated with a financial holding company.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:35 Although the market share of financial holding companies among the 25 largest securities firms had increased by 5.7 percentage points from that held in 1999 before the GLBA became effective, all of the increase came from foreign banks increasing their U.S. securities operations.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:35 The combined market share of the five largest U.S. based financial holding companies declined by 1 percentage point from 1999–2003, with the largest, Citigroup, experiencing a 2.4 percentage point reduction from 1999–2003.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:35 Of the 45 bank holding companies that had operated Section 20 affiliates before the GLBA, 40 had qualified as financial holding companies, 2 conducted securities underwriting and dealing through direct bank subsidiaries (i.e., "financial subsidiaries"), and 3 continued to operate Section 20 affiliates subject to pre-GLBA rules.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:8, fn. 15In a speech delivered shortly before the Joint Report was released, Federal Reserve Board Vice Chairman <a href="https://en.wikipedia.org/wiki/Roger_Ferguson" class="mw-redirect" title="Roger Ferguson" style="text-decoration-line: none; background: none;">Roger Ferguson</a> stated that the Federal Reserve had "not been able to uncover any evidence that the overall market structure of the [banking, insurance, and securities] segments of the financial services industry has substantially changed" since the GLBA.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-17" style="text-decoration-line: none; background: none;">[17]</a> Early in 2004, the <a href="https://en.wikipedia.org/wiki/Financial_Times" title="Financial Times" style="text-decoration-line: none; background: none;">Financial Times</a> reported that "financial supermarkets" were failing around the world, as both diversification and larger size failed to increase profitability.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-18" style="text-decoration-line: none; background: none;">[18]</a> The Congressional Research Service noted that after the GLBA became law the financial services markets in the United States "had not really integrated" as mergers and consolidations occurred "largely within sectors" without the expected "wholesale integration in financial services."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-19" style="text-decoration-line: none; background: none;">[19]</a>At a July 13, 2004, Senate Banking Committee hearing on the effects of the GLBA five years after passage, the Legislative Director of the <a href="https://en.wikipedia.org/wiki/Consumer_Federation" class="mw-redirect" title="Consumer Federation" style="text-decoration-line: none; background: none;">Consumer Federation</a> cited Roger Ferguson's 2003 speech and stated the "extravagant promises" of universal banking had "proven to be mostly hype." He noted that advocates of repealing Sections 20 and 32 had said "[b]anks, securities firms, and insurance companies would merge into financial services supermarkets" and, after five years, some mergers had occurred "but mostly within the banking industry, not across sectors."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-20" style="text-decoration-line: none; background: none;">[20]</a> Within the banking industry, Federal Reserve Board Chairman Alan Greenspan testified to Congress in 2004 that commercial bank consolidation had "slowed sharply in the past five years."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-21" style="text-decoration-line: none; background: none;">[21]</a>At the five-year anniversary of the GLBA in November 2004, the <a href="https://en.wikipedia.org/wiki/American_Banker" title="American Banker" style="text-decoration-line: none; background: none;">American Banker</a> quoted then retiring Comptroller of the Currency <a href="https://en.wikipedia.org/wiki/John_D.Hawke,Jr." class="mw-redirect" title="John D. Hawke, Jr." style="text-decoration-line: none; background: none;">John D. Hawke, Jr.</a> and former FDIC Chairman <a href="https://en.wikipedia.org/wiki/William_Seidman" class="mw-redirect" title="William Seidman" style="text-decoration-line: none; background: none;">William Seidman</a> as stating the GLBA had been less significant than expected in not bringing about the combinations of banking, insurance, and investment banking. Hawke described the GLBA provisions permitting such combinations as "pretty much a dead letter."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-22" style="text-decoration-line: none; background: none;">[22]</a> Although the article noted other commentators expected this would change in 2005, a May 24, 2005, American Banker article proclaimed 2005 the "year of divestiture" as "many observers" described Citigroup's sale of the Travelers life and annuity insurance business as "a nail in the coffin of financial services convergence."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-divest-14" style="text-decoration-line: none; background: none;">[14]</a>In 2005 the St. Louis Federal Reserve Bank's staff issued a study finding that after five years the GLBA's effects "have been modest" and the new law "simply made it easier for organizations to continue to engage in the activities they had already undertaken."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-23" style="text-decoration-line: none; background: none;">[23]</a><h3 style="background: none rgb(255, 255, 255); margin: 0.3em 0px 0px; overflow: hidden; padding-top: 0.5em; padding-bottom: 0px; border-bottom: 0px; line-height: 1.6;">Competition between commercial banking and investment banking firms[<a href="https://en.wikipedia.org/w/index.php?title=Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act&action=edit&section=5" title="Edit section: Competition between commercial banking and investment banking firms" style="text-decoration-line: none; background: none;">edit</a>]</h3>Commentators pointed to the <a href="https://en.wikipedia.org/wiki/Enron" title="Enron" style="text-decoration-line: none; background: none;">Enron</a>, <a href="https://en.wikipedia.org/wiki/WorldCom" class="mw-redirect" title="WorldCom" style="text-decoration-line: none; background: none;">WorldCom</a>, and other corporate scandals of the early 2000s as exposing the dangers of uniting commercial and investment banking.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-24" style="text-decoration-line: none; background: none;">[24]</a> More broadly, Arthur Wilmarth questioned whether those scandals and the "stock market bubble" of the late-1990s were linked to the growing role of commercial banks in the securities markets during the 1990s.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2008-25" style="text-decoration-line: none; background: none;">[25]</a>:559, 562–563 As Wilmarth's article indicated, the identified bank or bank affiliate activities linked to the Enron and World Com corporate scandals began in 1996 (or earlier) and most occurred before March 11, 2000, when bank holding companies could first use the new securities powers the GLBA provided to "financial holding companies."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-26" style="text-decoration-line: none; background: none;">[26]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2008-25" style="text-decoration-line: none; background: none;">[25]</a>:563–564, 614In the 1990s investment banks complained that commercial banking firms with Section 20 affiliates had coerced customers into hiring the Section 20 affiliate to underwrite securities in order to receive loans from the affiliated bank, which would have violated the <a href="https://en.wikipedia.org/wiki/Tying(commerce)" title="Tying (commerce)" style="text-decoration-line: none; background: none;">"anti-tying"</a> provisions of the Bank Holding Company Act. In 1997 the GAO issued a report reviewing those claims.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-27" style="text-decoration-line: none; background: none;">[27]</a> After the GLBA became law, investment banks continued to claim such illegal "tying" was being practiced. In 2003 the GAO issued another report reviewing those claims.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-28" style="text-decoration-line: none; background: none;">[28]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-29" style="text-decoration-line: none; background: none;">[29]</a>Partly because of the "tying" issue many commentators expected investment banking firms would need to convert into bank holding companies (and qualify as financial holding companies) to compete with commercial bank affiliated securities firms.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-30" style="text-decoration-line: none; background: none;">[30]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Macey_2000-4" style="text-decoration-line: none; background: none;">[4]</a>:694 No major investment bank, however, became a bank holding company until 2008 in the midst of the <a href="https://en.wikipedia.org/wiki/Late-2000s_financial_crisis" class="mw-redirect" title="Late-2000s financial crisis" style="text-decoration-line: none; background: none;">late-2000s financial crisis</a>. Then all five major "free standing" investment banks (i.e., those not part of a bank holding company)<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-31" style="text-decoration-line: none; background: none;">[31]</a> entered bankruptcy proceedings (Lehman Brothers), were acquired by bank holding companies (Bear Stearns by JP Morgan Chase and Merrill Lynch by Bank of America), or became bank holding companies by converting their industrial loan companies ("nonbank banks") into a national (Morgan Stanley) or state chartered Federal Reserve member bank (Goldman Sachs).<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FCIC_2011-32" style="text-decoration-line: none; background: none;">[32]</a>:154,290,339,337,341,362–3<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:§1.09, 1–78At the July 13, 2004, Senate Banking Committee hearing on the GLBA's effects, the <a href="https://en.wikipedia.org/wiki/Securities_Industry_Association" title="Securities Industry Association" style="text-decoration-line: none; background: none;">Securities Industry Association</a> representative explained securities firms had not taken advantage of the GLBA's "financial holding company" powers because that would have required them to end affiliations with commercial firms by 2009.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-34" style="text-decoration-line: none; background: none;">[34]</a> GLBA critics had complained that the law had prevented insurance and securities firms from truly entering the banking business by making a "faulty" distinction between commercial and financial activities.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-35" style="text-decoration-line: none; background: none;">[35]</a>The <a href="https://en.wikipedia.org/wiki/Consumer_Federation_of_America" title="Consumer Federation of America" style="text-decoration-line: none; background: none;">Consumer Federation of America</a> and other commentators suggested securities firms had avoided becoming "financial holding companies" because they wanted to avoid Federal Reserve supervision as bank holding companies.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-36" style="text-decoration-line: none; background: none;">[36]</a> The SEC (through its Chairman <a href="https://en.wikipedia.org/wiki/Arthur_Levitt" title="Arthur Levitt" style="text-decoration-line: none; background: none;">Arthur Levitt</a>) had supported efforts to permit securities firms to engage in non-FDIC insured banking activities without the Federal Reserve's "intrusive banking-style oversight" of the "overall holding company."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-37" style="text-decoration-line: none; background: none;">[37]</a> After the GLBA became law, securities firms continued (and expanded) their deposit and lending activities through the "unitary thrifts" and "nonbank banks" (particularly industrial loan companies) they had used before the GLBA to avoid regulation as bank holding companies.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FCIC_2011-32" style="text-decoration-line: none; background: none;">[32]</a>:55<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-38" style="text-decoration-line: none; background: none;">[38]</a> Alan Greenspan later noted securities firms only took on the "embrace" of Federal Reserve Board supervision as bank holding companies (and financial holding companies) after the financial crisis climaxed in September 2008.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-39" style="text-decoration-line: none; background: none;">[39]</a>Melanie Fein has described how the consolidation of the banking and securities industries occurred in the 1990s, particularly after the Federal Reserve Board's actions in 1996 and 1997 increasing Section 20 "bank-ineligible" revenue limits and removing "firewalls."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:§1.09, 1-77 to 1-78 Fein stated that "[a]lthough the Gramm-Leach-Blily Act was expected to trigger a cascade of new consolidation proposals, no major mergers of banks and securities firms occurred in the years immediately following" and that the "consolidation trend resumed abruptly in 2008 as a result of the financial crisis" leading to all the large investment banks being acquired by, or converting into, bank holding companies.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:§1.09, 1–78 Fein noted the lack of consolidation activity after 1999 and before September 2008 was "perhaps because much of the consolidation had occurred prior to the Act."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:§1.09, 1–78Commentators cite only three major financial firms from outside the banking industry (the discount broker <a href="https://en.wikipedia.org/wiki/Charles_Schwab_Corporation" title="Charles Schwab Corporation" style="text-decoration-line: none; background: none;">Charles Schwab</a>, the insurance company <a href="https://en.wikipedia.org/wiki/MetLife" title="MetLife" style="text-decoration-line: none; background: none;">MetLife</a>, and the mutual fund company <a href="https://en.wikipedia.org/wiki/Franklin_Resources" class="mw-redirect" title="Franklin Resources" style="text-decoration-line: none; background: none;">Franklin Resources</a>) for qualifying as financial holding companies after the GLBA became effective and before the <a href="https://en.wikipedia.org/wiki/Late-2000s_financial_crisis" class="mw-redirect" title="Late-2000s financial crisis" style="text-decoration-line: none; background: none;">late-2000s financial crisis</a>.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:§1.09[A], 1–80<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-40" style="text-decoration-line: none; background: none;">[40]</a><a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-FedRes_2003_glbarptcongress-6" style="text-decoration-line: none; background: none;">[6]</a>:3<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2002-2" style="text-decoration-line: none; background: none;">[2]</a>:223In 2011 the European Central Bank published a working paper that concluded commercial bank Section 20 affiliate underwriting of corporate bonds in the 1990s had been of lower quality than the underwriting of non-commercial bank affiliated securities firms.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-41" style="text-decoration-line: none; background: none;">[41]</a> The authors suggest the most likely explanation was that commercial bank affiliates "had to be initially more aggressive than investment bank houses in order to gain market share, and in pursuing this objective they might have loosened their credit standards excessively."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-42" style="text-decoration-line: none; background: none;">[42]</a> The working paper only examined corporate bonds underwritten from 1991 through 1999, a period before the GLBA permitted financial holding companies.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-43" style="text-decoration-line: none; background: none;">[43]</a><h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Glass–Steagall "repeal" and the financial crisis[<a href="https://en.wikipedia.org/w/index.php?title=Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act&action=edit&section=6" title="Edit section: Glass–Steagall " repeal="repeal" and="and" the="the" financial="financial" crisis="crisis" style="text-decoration-line: none; background: none;">edit</a>]</h2><a href="https://en.wikipedia.org/wiki/Robert_Kuttner" title="Robert Kuttner" style="text-decoration-line: none; background: none;">Robert Kuttner</a>, <a href="https://en.wikipedia.org/wiki/Joseph_Stiglitz" title="Joseph Stiglitz" style="text-decoration-line: none; background: none;">Joseph Stiglitz</a>, <a href="https://en.wikipedia.org/wiki/Elizabeth_Warren" title="Elizabeth Warren" style="text-decoration-line: none; background: none;">Elizabeth Warren</a>, Robert Weissman, <a href="https://en.wikipedia.org/wiki/Richard_D.Wolff" title="Richard D. Wolff" style="text-decoration-line: none; background: none;">Richard D. Wolff</a> and others have tied Glass–Steagall repeal to the <a href="https://en.wikipedia.org/wiki/Late-2000s_financial_crisis" class="mw-redirect" title="Late-2000s financial crisis" style="text-decoration-line: none; background: none;">late-2000s financial crisis</a>. Kuttner acknowledged "de facto inroads" before Glass–Steagall "repeal" but argued the GLBA's "repeal" had permitted "super-banks" to "re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s," which he characterized as "lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Kuttner-44" style="text-decoration-line: none; background: none;">[44]</a> Stiglitz argued "the most important consequence of Glass–Steagall repeal" was in changing the culture of commercial banking so that the "bigger risk" culture of investment banking "came out on top."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Stiglitz-45" style="text-decoration-line: none; background: none;">[45]</a> He also argued the GLBA "created ever larger banks that were too big to be allowed to fail," which "provided incentives for excessive risk taking."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-46" style="text-decoration-line: none; background: none;">[46]</a> Warren explained Glass–Steagall had kept banks from doing "crazy things." She credited FDIC insurance, the Glass–Steagall separation of investment banking, and SEC regulations as providing "50 years without a crisis" and argued that crises returned in the 1980s with the "pulling away of the threads" of regulation.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Warren-47" style="text-decoration-line: none; background: none;">[47]</a> Weissman agrees with Stiglitz that the "most important effect" of Glass–Steagall "repeal" was to "change the culture of commercial banking to emulate Wall Street's high-risk speculative betting approach."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-48" style="text-decoration-line: none; background: none;">[48]</a><a href="https://en.wikipedia.org/wiki/Lawrence_J.White" title="Lawrence J. White" style="text-decoration-line: none; background: none;">Lawrence White</a> and <a href="https://en.wikipedia.org/wiki/Jerry_Markham" title="Jerry Markham" style="text-decoration-line: none; background: none;">Jerry Markham</a> rejected these claims and argued that products linked to the financial crisis were not regulated by Glass–Steagall or were available from commercial banks or their affiliates before the GLBA repealed Glass–Steagall sections 20 and 32.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-W&M-49" style="text-decoration-line: none; background: none;">[49]</a> <a href="https://en.wikipedia.org/wiki/Alan_Blinder" title="Alan Blinder" style="text-decoration-line: none; background: none;">Alan Blinder</a> wrote in 2009 that he had "yet to hear a good answer" to the question "what bad practices would have been prevented if Glass–Steagall was still on the books?" Blinder argued that "disgraceful" <a href="https://en.wikipedia.org/wiki/Mortgage_underwriting" title="Mortgage underwriting" style="text-decoration-line: none; background: none;">mortgage underwriting</a> standards "did not rely on any new GLB powers," that "free-standing investment banks" not the "banking-securities conglomerates" permitted by the GLBA were the major producers of "dodgy MBS," and that he could not "see how this crisis would have been any milder if GLB had never passed."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-50" style="text-decoration-line: none; background: none;">[50]</a> Similarly, Melanie Fein has written that the financial crisis "was not a result of the GLBA" and that the "GLBA did not authorize any securities activities that were the cause of the financial crisis."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:1–6 Fein noted "[s]ecuritization was not an activity authorized by the GLBA but instead had been held by the courts in 1990 to be part of the business of banking rather than an activity proscribed by the Glass–Steagall Act."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Fein_2011-33" style="text-decoration-line: none; background: none;">[33]</a>:§1.02, 1–7 As described above, in 1978 the OCC approved a national bank securitizing residential mortgages.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-OCC1978-51" style="text-decoration-line: none; background: none;">[51]</a>Carl Felsenfeld and David L. Glass wrote that "[t]he public—which for this purpose includes most of the members of Congress" does not understand that the investment banks and other "shadow banking" firms that experienced "runs" precipitating the financial crisis (i.e., <a href="https://en.wikipedia.org/wiki/AIG" class="mw-redirect" title="AIG" style="text-decoration-line: none; background: none;">AIG</a>, <a href="https://en.wikipedia.org/wiki/Bear_Stearns" title="Bear Stearns" style="text-decoration-line: none; background: none;">Bear Stearns</a>, <a href="https://en.wikipedia.org/wiki/Lehman_Brothers" title="Lehman Brothers" style="text-decoration-line: none; background: none;">Lehman Brothers</a>, and <a href="https://en.wikipedia.org/wiki/Merrill_Lynch" title="Merrill Lynch" style="text-decoration-line: none; background: none;">Merrill Lynch</a>) never became "financial holding companies" under the GLBA and, therefore, never exercised any new powers available through Glass–Steagall "repeal."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-52" style="text-decoration-line: none; background: none;">[52]</a> They joined <a href="https://en.wikipedia.org/wiki/Jonathan_R.Macey" title="Jonathan R. Macey" style="text-decoration-line: none; background: none;">Jonathan R. Macey</a> and <a href="https://en.wikipedia.org/wiki/Peter_J.Wallison" title="Peter J. Wallison" style="text-decoration-line: none; background: none;">Peter J. Wallison</a> in noting many GLBA critics do not understand that Glass–Steagall's restrictions on banks (i.e., Sections 16 and 21) remained in effect and that the GLBA only repealed the affiliation provisions in Sections 20 and 32.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-53" style="text-decoration-line: none; background: none;">[53]</a> The <a href="https://en.wikipedia.org/wiki/American_Bankers_Association" title="American Bankers Association" style="text-decoration-line: none; background: none;">American Bankers Association</a>, former President <a href="https://en.wikipedia.org/wiki/Bill_Clinton" title="Bill Clinton" style="text-decoration-line: none; background: none;">Bill Clinton</a>, and others have argued that the GLBA permission for affiliations between securities and commercial banking firms "helped to mitigate" or "softened" the financial crisis by permitting bank holding companies to acquire troubled securities firms or such troubled firms to convert into bank holding companies.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-mitigate-54" style="text-decoration-line: none; background: none;">[54]</a><a href="https://en.wikipedia.org/wiki/Martin_Mayer" title="Martin Mayer" style="text-decoration-line: none; background: none;">Martin Mayer</a> argued there were "three reasonable arguments" for tying Glass–Steagall repeal to the financial crisis: (1) it invited banks to enter risks they did not understand; (2) it created "network integration" that increased contagion; and (3) it joined the incompatible businesses of commercial and investment banking. Mayer, however, then described banking developments in the 1970s and 1980s that had already established these conditions before the GLBA repealed Sections 20 and 32.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-55" style="text-decoration-line: none; background: none;">[55]</a> Mayer's 1974 book The Bankers detailed the "revolution in banking" that followed Citibank establishing a liquid secondary market in "negotiable certificates of deposit" in 1961. This new "liability management" permitted banks to fund their activities through the "capital markets," like nonbank lenders in the "shadow banking market," rather than through the traditional regulated bank deposit market envisioned by the 1933 Banking Act.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-56" style="text-decoration-line: none; background: none;">[56]</a> In 1973 <a href="https://en.wikipedia.org/wiki/Sherman_J.Maisel" title="Sherman J. Maisel" style="text-decoration-line: none; background: none;">Sherman J. Maisel</a> wrote of his time on the Federal Reserve Board and described how "[t]he banking system today is far different from what it was even in 1960" as "formerly little used instruments" were used in the "money markets" and "turned out to be extremely volatile."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-57" style="text-decoration-line: none; background: none;">[57]</a>In describing the "transformation of the U.S. financial services industry" from 1975-2000 (i.e., from after the "revolution in banking" described by Mayer in 1974 to the effective date of the GLBA), Arthur Wilmarth described how during the 1990s, despite remaining bank holding companies, <a href="https://en.wikipedia.org/wiki/J.P.Morgan_%26_Co." title="J.P. Morgan & Co." style="text-decoration-line: none; background: none;">J.P. Morgan & Co.</a> and <a href="https://en.wikipedia.org/wiki/Bankers_Trust" title="Bankers Trust" style="text-decoration-line: none; background: none;">Bankers Trust</a> "built financial profiles similar to securities firms with a heavy emphasis on trading and investments."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Wilmarth_2002-2" style="text-decoration-line: none; background: none;">[2]</a>:374 In 1993, Helen Garten described the transformation of the same companies into "wholesale banks" similar to European "universal banks."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-58" style="text-decoration-line: none; background: none;">[58]</a>Jan Kregel agrees that "multifunction" banks are a source for financial crises, but he argues the "basic principles" of Glass–Steagall "were eviscerated even before" the GLBA.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Kregel_2010b-59" style="text-decoration-line: none; background: none;">[59]</a>:67 Kregel describes Glass–Steagall as creating a "monopoly that was doomed to fail" because after World War II nonbanks were permitted to use "capital market activities" to duplicate more cheaply the deposit and commercial loan products for which Glass–Steagall had sought to provide a bank monopoly.<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-Kregel_2010a-60" style="text-decoration-line: none; background: none;">[60]</a>:8–9While accepting that under Glass–Steagall financial firms could still have "made, sold, and securitized risky mortgages, all the while fueling a massive housing bubble and building a highly leveraged, Ponzi-like pyramid of derivatives on top," the <a href="https://en.wikipedia.org/wiki/Institute_for_Local_Self-Reliance" title="Institute for Local Self-Reliance" style="text-decoration-line: none; background: none;">New Rules Project</a> concludes that commentators who deny the GLBA played a role in the financial crisis "fail to recognize the significance of 1999 as the pivotal policy-making moment leading up to the crash." The Project argues 1999 was Congress's opportunity to reject 25 years of "deregulation" and "confront the changing financial system by reaffirming the importance of effective structural safeguards, such as the Glass–Steagall Act's firewall and market share caps to limit the size of banks; bringing shadow banks into the regulatory framework; and developing new rules to control the dangers inherent in derivatives and other engineered financial products."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-61" style="text-decoration-line: none; background: none;">[61]</a><a href="https://en.wikipedia.org/wiki/Raj_Date" title="Raj Date" style="text-decoration-line: none; background: none;">Raj Date</a> and Michael Konczal similarly argued that the GLBA did not create the financial crisis but that the implicit "logical premises" of the GLBA, which included a belief that "non-depository 'shadow banks' should continue to compete in the banking business," "enabled the financial crisis" and "may well have hastened it."<a href="https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass%E2%80%93Steagall_Act#cite_note-D&K-62" style="text-decoration-line: none; background: none;">[62]</a><h2 style="background: none rgb(255, 255, 255); font-weight: normal; margin: 1em 0px 0.25em; overflow: hidden; padding: 0px; border-bottom: 1px solid rgb(162, 169, 177); line-height: 1.3;">Notes</h2>
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