As Banks Start Failing: Clinton, Banking Deregulation & Undoing The New Deal

Question for Clinton and her supporters- does she and do YOU support Clinton's repeal of the Glass Steagall Act?

Clinton, Republicans agree to deregulation of US financial system (November 1999)

An agreement between the Clinton administration and congressional Republicans, reached during all-night negotiations which concluded in the early hours of October 22, sets the stage for passage of the most sweeping banking deregulation bill in American history, lifting virtually all restraints on the operation of the giant monopolies which dominate the financial system.

The proposed Financial Services Modernization Act of 1999 would do away with restrictions on the integration of banking, insurance and stock trading imposed by the Glass-Steagall Act of 1933, one of the central pillars of Roosevelt's New Deal. Under the old law, banks, brokerages and insurance companies were effectively barred from entering each others' industries, and investment banking and commercial banking were separated.

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Differing versions of financial services deregulation passed the House and Senate earlier this year, and the conference committee was called to work out a consensus bill and avert a White House veto. The principal bone of contention in the last few days before the agreement had nothing to do with the central thrust of the bill, on which there was near-unanimous bipartisan support.

The sticking point was the effort by Gramm to gut the Community Reinvestment Act, a 1977 anti-redlining law which requires that banks make a certain proportion of their loans in minority and poor neighborhoods. Gramm blocked passage of a similar deregulation bill last year over demands to cripple the CRA, and bank lobbyists were in a panic, during the week before the deal was made, that the dispute would once again prevent any bill from being adopted.

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The latter provision was particularly offensive to black and other minority business and community groups, who have used the CRA provisions as a lever by threatening to challenge mergers and other bank operations which require government approval. In most such cases, the banks have offered loans to businessmen or outright grants to community groups in return for dropping their legal actions. These petty-bourgeois elements have been able to posture as defenders of the black or Hispanic community, while pocketing what are essentially payoffs from finance capital and concealing from the public the details of this relationship.

The banks and other financial institutions did not themselves oppose continuation of the CRA, which they have treated as nothing more than a cost of doing a highly profitable business in minority areas. Loans tied to the CRA average a 20 percent rate of return. Financial industry lobbyists complained that they were being caught in a crossfire between the Republicans and Democrats which was unrelated to the main purpose of the bill.

The Clinton White House threatened to veto the bill if CRA provisions were substantially weakened, in response to heavy pressure from the Congressional Black Caucus and the Reverend Jesse Jackson, whose Operation PUSH has made extensive use of CRA in its campaigns to pressure corporations and banks for more opportunities for black businessmen. But eventually the White House caved in to Gramm, accepting his amendments so long as the program remained formally in place.

The White House similarly retreated on pledges that consumer privacy would be protected in the legislation. Consumer groups pointed to the potential for abuse of financial information once giant conglomerates were created which would handle loans, investments and insurance at the same time. For example: a bank could refuse to give a 30-year mortgage to a customer whose medical records, filed with the bank's insurance subsidiary, revealed a fatal disease.

The final draft of the bill contains a consumer privacy protection clause, but it is extremely weak, applying only to the transfer of information outside of a financial conglomerate, not within it. Thus Citigroup will be able to pass on financial information about its bank depositors to Travelers Insurance, but not to an outside company like Prudential. Even that limitation would be breached if there was a contractual relationship with the outside company, as in the case of a telemarketer which did work for Citigroup and was given private information about Citigroup depositors to aid in its telephone solicitations.

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The Wall Street Journal celebrated the agreement to end such restrictions with an editorial declaring that the banks had been unfairly scapegoated for the Great Depression. The headline of one Journal article detailing the impact of the proposed law declared, "Finally, 1929 Begins to Fade."

And of course just about every Repuke.

:puke:



IIRC only 6 Senators voted against it.

threw them under the bus.

No one is talking about it anymore.

Good to know.


:eyes:

then she gets that, NAFTA and everything else that goes with it.

Opened the door to all kinds of nonsense allowing banks to cross lines into risk investments.

Best news I heard all day was that the BSC exec team lost their golden parachutes by basing them on company stock. Like Enron -- but they just didn't cash out quick enough...

the financial instriments being designed allow anyone in any corporate form to do anything anyone else was doing - so the 1933 law was just imposing different regulatory costs on the same transaction - and that did not make sense.

The derivative developement was in the late 70's and predates the 90's change in the law by a bit.

The sub-prime lending because real estate always goes up was "Bush greed" in action.

Clinton had little to do with developing the Banking Deregulation that was needed and was passed, or the undoing The New Deal that Reagan and the Bushes have attempted.

Just what bill that was passed with her vote or with her vote and developed by her causes you to think that she is working to destroy the New Deal?

would have pushed for further deregulation of financial institutions.

that's not a very good source. You can get better coverage on the same topic from elsewhere.

If he has...please give me a link... Thanks in Advance.

But, in 2008, with all the easy, safe loans already taken, the low-hanging fruit picked, others moved into the risky parts of the market. Because of predatory lending, and the seemingly endless real estate boom, people kept attempting to leverage more and more, but as with any industry, the market finally got saturated, and we have too many houses, causing the market to fall. Since people owe too much they default and the investors are left holding the bag. The banks can't pay out all the dividends they owe, and so they fall.

As the economy tkes more and more hits, people lose their jobs and the cycle pulls itself lower and lower, until all banks are vulnerable.

So, it was endless greed on both the borrower's part and the banks.

How'm I doin'?