Proud Elitist mentioned that it was Gramms fault for his banking reform law in 1999. Pround Elitist is only giving us half the story.
Yes, Gramm and other Republicans were eager to pass the new law, and so were Chris Dodd and Schumer and Clinton and the Treasury Dept.
However, because the Democrats are slaves to their left-wing base, the Democrats would not permit the Bill to be signed unless there were provisions in the bill that no bank can take advantage of the new markets opened to them UNLESS they have clear recored of giving out loans to minorities and other groups were not given loans under normal credit-check standards.
So the Democrats mandated that these crappy loans be issued as a requirement for a lender to enter into the global finance system…
The Democrats sealed our doom.
This is from the New York Times when the bill passed 23 Oct 1999:
WASHINGTON — The Clinton Administration and top Republican lawmakers reached an agreement early Friday to overhaul the financial system, repealing Depression-era laws that have restricted the banking, securities and insurance industries from expanding into one another’s businesses.
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For instance, the nation’s largest financial services company, Citigroup, would have been forced to sell some of its insurance operations as part of the $72 billion merger last year between Citibank and Travelers Group without either the legislation or a waiver from regulators.
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The legislation will more easily enable financial companies to offer corporate clients a full range of services, from traditional loans to investment banking services, like public stock offerings. And for consumers, it paves the way for financial supermarkets, which will be able to offer one-stop shopping for an array of services, all under one roof. The measure is also expected to clear a path for a new and bigger wave of corporate deal-making as more companies consolidate.
White House officials withheld final approval of the agreement until aides could see the measure’s language. But the officials indicated Friday night that, with broad support from Democrats in Congress, the measure was all but certain to be signed by President Clinton. As such, it will be one of the most significant pieces of legislation to be written by the White House and the 106th Congress, which began its term considering whether to remove Clinton and has had a bitter relationship ever since.
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Treasury Secretary Lawrence H. Summers said in an interview, “At the end of the 20th century, we will at last be replacing an archaic set of restrictions with a legislative foundation for a 21st-century financial system.” The measure, he added, “would provide significant benefits to the national economy.”
Senator Gramm said the measure “is the most important banking legislation in 60 years.”
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The legislation repeals the Glass-Steagall Act, or, as it is formally known, the Banking Act of 1933, which broke up the powerful House of Morgan and divided Wall Street between investment banks and commercial banks. It also makes significant changes to the Bank Holding Company Act of 1956, which had restricted what banks could do in the insurance business.
The Glass-Steagall Act was enacted after the stock market crash of 1929 and the ensuing banking crisis and Great Depression. On the day it was signed, along with the National Industrial Recovery Act and other measures, President Franklin D. Roosevelt called the package “the most important and far-reaching legislation ever enacted by the American Congress.”
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The breakthrough in Friday’s legislation came in a backroom meeting at the Capitol soon after midnight, when a group of moderate Senate Democrats — led by Christopher Dodd of Connecticut and Charles E. Schumer of New York — forced a compromise between Gramm and the White House over the legislation’s effect on the Community Reinvestment Act, a 1977 anti-discrimination law intended to encourage lending to minorities and others historically denied access to credit.
Dodd, whose state is home to the nation’s largest insurance companies, and Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act. Both men said in interviews Friday that they moved to strike a compromise after it became apparent that the legislation might be killed, as it was last year by Gramm, over the debate about the Community Reinvestment Act.
Gramm had maintained that he did not want anything in the bill that would expand the application of the Community Reinvestment Act because it was, he said, unnecessarily burdensome to banks. He had sought a provision that would exempt thousands of smaller banks from the law. He also wanted a provision that would expose what he has described as the “extortion” committed by community groups against banks by requiring the groups to disclose any special financial deals the groups extract from the banks.
But the White House found that provision unacceptable and had its own ideas about community lending. It wanted the legislation to prevent any bank with an unsatisfactory record of making loans to the disadvantaged from expanding into new areas, like insurance or securities.
The White House had insisted that the President would veto any legislation that would scale back minority-lending requirements. Four days of intense negotiations between Summers, Gene Sperling, the President’s top economic policy adviser, and Gramm, while moving the two sides closer, failed to resolve the differences.
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After receiving calls from executives of some of the nation’s leading financial companies, Dodd and Schumer began trying to work out a compromise. An agreement was quickly reached on the issue of banks and expanded powers – no institution would be allowed to move into any new lines of business without a satisfactory lending record.
The lawmakers bogged down on Gramm’s insistence that all community organizations disclose to the regulators what benefits they get from banks. Some Democrats expressed the fear that Gramm’s proposal would require the Boy Scouts to file reports with the regulators.
Ultimately, the following provisions were drawn up and both the White House and Gramm said they could accept them:
¶Banks will not be able to move into new lines of business unless they have satisfactory lending records.
¶Community groups will have to make disclosures to regulators about certain kinds of financial deals with banks that they have pressed to make loans under the Community Reinvestment Act.
¶Wholesale financial institutions, a new kind of business that takes large, uninsured bank deposits, cannot be affiliated with commercial banks.
¶Small banks with satisfactory or excellent track records of lending to the underserved would be reviewed less frequently under the Community Reinvestment Act. As a practical matter smaller banks are reviewed about every three years. The deal struck today allows all rural banks and banks with less than $250 million in assets to undergo examination once every five years if their last exam resulted in an “outstanding” grade and every four years if they last scored “satisfactory.”
For more than 20 years, Congress has tried unsuccessfully to rewrite the nation’s financial services laws and repeal Glass-Steagall, particularly as many other industrial nations had no similar restrictions on their banks. But until recently, the three main industries affected by the legislation — banks, securities companies and insurers — had competing interests and were able to lobby any legislation to a standstill.
That all changed in recent years as the lines between the industries began to blur and it became more broadly acknowledged that a deregulation of financial services could be beneficial to insurers, bankers and securities firms alike. Once the three industries rallied around the legislation, they became a formidable political force, raising millions of dollars for lawmakers and pressing both Republican leaders in Congress and the White House for new legislation.
