Prophetic 1999 Times Article on Financial Deregulation

On November 5, 1999, Congress repealed the Glass-Steagall Act at the behest of Phil Gramm and a bunch of banks. The Glass-Steagall Act had been passed in the wake of the Great Depression to prevent banks from getting into certain riskier businesses and investments.

This unbelievable New York Times article from that fateful day said the move would make for “a new era on Wall Street in which commercial banks, securities houses and insurers will find it easier and cheaper to enter one another’s businesses.” We all know how that turned out.

The article is a cornucopia of embarrassment, prescience, and irony. As a colleague of mine said, “You can see them taking the wheels off.” And they’re thrilled about it.

Larry Summers, who all now know as the leader of Obama’s super-serious economic nerd squad was, back in 1999, just another crusader for bank emancipation:

”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,” Treasury Secretary Lawrence H. Summers said. ”This historic legislation will better enable American companies to compete in the new economy.”

Remember, the “handful of dissenters” of today might be trying to save your 401k:

“The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation’s financial system. The original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression.”

“The opponents of the measure gloomily predicted that by unshackling banks and enabling them to move more freely into new kinds of financial activities, the new law could lead to an economic crisis down the road when the marketplace is no longer growing briskly.”

”’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,’ said Senator Byron L. Dorgan, Democrat of North Dakota.”

Bob Kerrey was very wrong:

”’The concerns that we will have a meltdown like 1929 are dramatically overblown,’ said Senator Bob Kerrey, Democrat of Nebraska.”

And everyone else was wrong too. Only eight Senators voted against repealing Glass-Steagall:

“One Republican Senator, Richard C. Shelby of Alabama, voted against the legislation. He was joined by seven Democrats: Barbara Boxer of California, Richard H. Bryan of Nevada, Russell D. Feingold of Wisconsin, Tom Harkin of Iowa, Barbara A. Mikulski of Maryland, Mr. Dorgan and Mr. Wellstone.”

And what was the media doing, by and large? Warning us about the impending financial catastrophe, of course. From Y2K.

Read the whole Times piece here.