the dems AND the republicans, by an astonishing 90 to 8 vote tossed out the last of the banking regulations that forced the banks and the investment houses to remain separate entities.
In 1999, the law banning brokerages and banks from marrying one another -- the Glass-Steagall Act of 1933 -- was lifted, and voila, the financial supermarket has grown to be the places we know as Citigroup, UBS, Deutsche Bank, et al.
But now that banks seemingly have stumbled over their bad mortgages, it's worth asking whether the fallout would be wreaking so much havoc on the rest of the financial markets had Glass-Steagall been kept in place.
Diversity has always been the pathway to lowering risk. And Glass-Steagall kept diversity in place by separating the financial powers that be: banks and brokerages.
Glass-Steagall was passed by Congress to prohibit banks from owning full-service brokerage firms and vice versa so investment banking activities, such as underwriting corporate or municipal securities, couldn't be called into question and also to insulate bank depositors from the risks of a stock market collapse such as the one that precipitated the Great Depression.
But as banks increasingly encroached upon the securities business by offering discount trades and mutual funds, the securities industry cried foul. So in that telling year of 1999, the prohibition ended and financial giants swooped in. Citigroup led the way and others followed. We saw Smith Barney, Salomon Brothers, PaineWebber and lots of other well-known brokerage brands gobbled up.
At brokerage firms there are supposed to be Chinese walls that separate investment banking from trading and research activities. These separations are supposed to prevent dealmakers from pressuring their colleague analysts to give better results to clients, all in the name of increasing their mutual bottom line.
Well, we saw how well these walls held up during the heyday of the dot-com era when ridiculously high estimates were placed on corporations that happened to be underwritten by the same firm that was also trading its securities. When these walls were placed within their new bank homes, cracks appeared and -- it looks ever so apparent -- ignored.
...Marketwatch. Sept 7 2007
That was Clinton.. and a Republican Congress. FAIL
The protections enacted to prevent another economy busting crash were tossed out and the banks given the green light to play with their mortgage products as investments. This plundering is not partisan.. it is just plain bi-partisan greed.
Enough is enough.. matters not a freakin bit if yer a democrat or a republican.. change out your crooks. Get new ones. Preferably plumbers and comedians. Lets not send the same cretins that voted for deregulation back to the hill.
