Orlando Mortgage Blog

Chain of Blame Has Roots In The Demise Of Glass-Steagall

April 28th, 2010 10:50 AM by BILL WILBANKS

 

With all the minute-by-minute coverage of the latest "Blame Game Hearings" in DC that seem to have every politician looking to pillory everyone else for today's financial crisis I 'd like to remind folks of a few things. I seem to remember a covey of names that have been forgotten in what I have believed for years was the cornerstone of the financial behemoth we've found ourselves faced with lo these last 3 to 4 years. Though it's true there are many other ingredients baked in this cake, I believe this opened Pandora's box and let out or allowed much of what we face today. (There I go mixing my metaphors again)...

After the Great Depression a public outcry eventually pushed congress and the senate into passing strick regulation on what had become an out of control banking industry (sound familiar?), that set limits on what business a bank was able to participate in and not. It was called the Glass-Steagall Act. It effectively limited a bank's cross sell capabilities into other nontraditional banking areas such as securities, equities, insurance sales and underwriting of various products not considered "Bank" business. It worked well for 60 years or so. Big banks were against it from the start, seeing it as a tremendous roadblock to doing business. More competition was probably beneficial in many ways, but no one set limits or put on the brakes when it was shelved and the smartest folks in the room went wild with new product development.

I highly recommend reading the following link which is from a PBS documentary on this matter. Everyone today is in an uproar asking "How could this all happen" and this tells you exactly how it started and who many of the players were. Most of today's Great Recession could not have transpired if this law had not been put on the shelf. It was and it was a decade long party.

Please read this article...

When you are done please read the press release from October 22, 1999 thanking many of those who were "Helpful" in the process of killing the bill...

  

Posted in:General
Posted by BILL WILBANKS on April 28th, 2010 10:50 AM

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