Back in November 1999, Congress passed legislation pushed by then Sen. Phil Gramm (R-TX), rescinding the Depression-era Glass-Steagall Act. The measure, backed by the Clinton administration, and overwhelmingly passed by the Senate (90-8) and the House (362-57), opened the way for banks to merge with investment banks and insurance companies, and led directly to the current financial cataclysm.
What they said in 1999 about repealing the Glass-Steagall Act:
Larry Summers, he wasn't a Senator but is the director of President Obama’s National Economic Council:
"Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century. This historic legislation will better enable American companies to compete in the new economy."
Senator Charles Schumer (D-NY):
"If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world. 'There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive."
Senator Phil Gramm (R-Texas):
"The world changes, and we have to change with it. We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century. Glass-Steagall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer."
Sen. Bob Kerry (D-NB):
“The concerns that we will have a meltdown like 1929 are dramatically overblown.”
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And those who spoke out against this insane measure:
Sen. Byron Dorgan (D-ND), one of seven Senate Democrats who voted against revoking Glass-Steagall, said in 1999:
“I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010. I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness."
Sen. Paul Wellstone (D-MN), who also voted against repeal said:
“…determined to unlearn the lessons from our past mistakes. Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis. Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place."
News source:
http://www.counterpunch.org/lindorff03272009.html
FOR IMMEDIATE RELEASE: CONTACT: CHRISTI HARLAN
Friday, November 12, 1999 202-224-0894
GRAMM'S STATEMENT AT SIGNING CEREMONY
FOR GRAMM-LEACH-BLILEY ACT
Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, made the following statement today in a ceremony at the Eisenhower Executive Office Building, where President Clinton signed the Gramm-Leach-Bliley Act into law:
"The world changes, and Congress and the laws have to change with it.
"Abraham Lincoln used to like to use the analogy that old and outmoded laws need to be changed because it made about as much sense to continue to impose them on people as it did to ask a man to wear the same clothes he did when he was a child.
"In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.
"We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom.
"I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality."
-30-
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release November 12, 1999
REMARKS BY THE PRESIDENT
AT FINANCIAL MODERNIZATION BILL SIGNING
Presidential Hall
1:37 P.M. EST
THE PRESIDENT: Thank you and good afternoon. I thank you all for coming to the formal ratification of a truly historic event -- Senator Gramm and Senator Sarbanes have actually agreed on an important issue. (Laughter.) Stay right there, John. (Laughter.) I asked Phil on the way out how bad it's going to hurt him in Texas to be walking out the door with me. (Laughter.) We decided it was all right today.
Like all those before me, I want to express my gratitude to those principally responsible for the success of this legislation. I thank Secretary Summers and the entire team at Treasury, but especially Under Secretary Gensler, for their work, and Assistant Secretary Linda Robertson. I thank you, Chairman Greenspan, for your constant advocacy of the modernization of our financial system. I thank you, Chairman Levitt, for your continuing concern for investor protections. And I thank the other regulators who are here.
I thank Senator Gramm and Senator Sarbanes, Chairman Leach and Congressman LaFalce, and all the members of Congress who are here. Senator Dodd told me the Sisyphus story, too, over and over again, but I've rolled so many rocks up so many hills, I had a hard time fully appreciating the significance of it. (Laughter.)
I do want to thank all the members here and all those who aren't here. And I'd like to thank two New Yorkers who aren't here who have been mentioned -- former Secretary of the Treasury Bob Rubin, who worked very hard on this; and former Chairman, Senator Al D'Amato, who talked to me about this often. So this is a day we can celebrate as an American day.
To try to give some meaning to the comments that the previous speakers have made about how we're making a fundamental and historic change in the way we operate our financial institutions, I think it might be worth pointing out that this morning we got some new evidence on the role of new technologies in our economy, which showed that over the past four years, productivity has increased by a truly remarkable 2.6 percent -- that's about twice the rate of productivity growth the United States experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent.
This is not just some aloof statistic that matters only to the Federal Reserve, the Treasury, and Wall Street economists. It is the key to rising paychecks and greater security and opportunity for ordinary Americans. And the combination of rising productivity, more open borders and trade, working to keep down inflation, the dramatic reduction of the deficit and the accumulation of the surplus, and the continued commitment to the investment in the American people, research and development, and new productivity-inducing technologies has given us the most sustained real wage growth in more than two decades, with the lowest inflation in more than three decades.
I can tell you that back in December of 1992, when we were sitting around the table at the Governor's Mansion, trying to decide what had to be in this economic program, the economists that I had there, who are normally thought to be -- you know, you say, well, they're Democrats, they'll be more optimistic -- none of them believed that we could grow the economy for this long with an unemployment rate this low and an inflation rate this low. And it's a real tribute to the American people.
So what you see here, I think, is the most important recent example of our efforts here in Washington to maximize the possibilities of the new information age global economy, while preserving our responsibilities to protect ordinary citizens and to build one nation here. And there will always be competing interests. You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right. And I have always believed that one required the other.
It is true that the Glass-Steagall law is no longer appropriate to the economy in which we lived. It worked pretty well for the industrial economy, which was highly organized, much more centralized and much more nationalized than the one in which we operate today. But the world is very different.
Now we have to figure out, well, what are still the individual and family and business equities that are still involved that need some protections. And the long, and often tortured story of this law can be seen as a very stunning specific example of the general challenge that will face lawmakers of both parties, that will face liberals and conservatives, that will face all Americans as we try to make sure that the 21st century economy really works for our country and works for the people who live in it.
So I think you should all be exceedingly proud of yourselves, including being proud of your differences and how you tried to reconcile them. Over the past seven years, we've tried to modernize the economy; and today what we're doing is modernizing the financial services industry, tearing down these antiquated walls and granting banks significant new authority.
This will, first of all, save consumers billions of dollars a year through enhanced competition. It will also protect the rights of consumers. It will guarantee that our financial system will continue to meet the needs of underserved communities -- something that the Vice President and I tried to do through the empowerment zones, the enterprise communities, the community development financial institutions, but something which has been largely done through the private sector and honoring the Community Reinvestment Act.
The legislation I signed today establishes the principles that as we expand the powers of banks, we will expand the reach of that act. In order to take advantage of the new opportunities created by the law, we must first show a satisfactory record of meeting the needs of all the communities the financial institution serves.
I want to thank Senator Sarbanes and Congressman LaFalce for their leadership on the CRA issue. I want to applaud literally hundreds of dedicated community groups all around our country that work so hard to make sure the CRA brings more hope and capital to hard-pressed areas.
The bill I signed today also does, as Congressman Leach says, take significant steps to protect the privacy of our financial transactions. It will give consumers, for the very first time, the right to know if their financial institution intends to share their financial data, and the right to stop private information from being shared with outside institutions.
Like the new medical privacy protections I announced two weeks ago, these financial privacy protections have teeth. We granted regulators full enforcement authority and created new penalties to punish abusive practices. But as others have said here, I do not believe that the privacy protections go far enough. I am pleased the act actually instructs the Treasury to study privacy practices in the financial services industry, and to recommend further legislative steps. Today, I'm directing the National Economic Council to work with Treasury and OMB to complete that study and give us a legislative proposal which the Congress can consider next year.
Without restraining the economic potential of new business arrangements, I want to make sure every family has meaningful choices about how their personal information will be shared within corporate conglomerates. We can't allow new opportunities to erode old and fundamental rights.
Despite this concern, I want to say again, this legislation is truly historic. And it indicates what can happen when Republicans and Democrats work together in a spirit of genuine cooperation -- when we understand we may not be able to agree on everything, but we can reconcile our differences once we know what the larger issue is -- how to maximize the opportunities of the American people in a global information age, and still preserve our sense of community and protection for individual rights.
In that same spirit, I hope we will soon complete work on the budget. I hope we will complete work on the Work Incentives Improvement Act, to allow disabled people to go to work -- and I know Senator Gramm has been working with Senator Roth and Senator Jeffords and Senator Moynihan and Senator Kennedy on that.
There are a lot of things we can do once we recognize we're dealing with a big issue over which we ought to have some disagreements, but where we can come together in constructive and honorable compromise to keep pushing our country into the possibilities of the future.
This is a very good day for the United States. Again, I thank all of you for making sure that we have done right by the American people and that we have increased the chances of making the next century an American century. I hope we can continue to focus on the economy and the big questions we will have to deal with revolving around that. I hope we will continue to pay down our debt. I still believe in a global economy. We will maximize the opportunities created by this law if the government is reducing its debt and its claim on available capital. So I hope very much that that will be part of our strategy in the future.
But today we prove that we could deal with the large issue facing our country and every other advanced economy in the world. If we keep dealing with it in other contexts, the future of our children will be very bright, indeed.
Thank you very much. I'd like to ask all the members of Congress to come up here while we sign the bill. Thank you. (Applause.)
President Clinton Signs Repeal
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