Predicted Exactly When Regrets Would Occur
March 30, 2009
Ten years ago Democrat Senator Byron Dorgan was one of eight Senators who voted against the Gramm-Leach-Bliley Act dubbed the Financial Services Modernization Act. This piece of legislation done away with the Glass-Steagall Act of 1933. Back then Dorgan predicted what would happen and when it might happen. He was exactly right in both cases.
These two acts have been often talked about & compared during the past several months. In case you haven’t heard, the Glass-Steagall Act was signed into law as a result of the 1929 stock market crash. Among other things, it prevented banks from becoming involved in real estate and securities. The Gramm-Leach-Bliley Act reversed the former and made it legal for banks to participate in those dealings (Lobbyist spent $300 million in getting the legislation passed). Need I remind anyone what caused the mess our country is in today?
Senator Dorgan, in trying to defeat the Gramm-Leach-Bliley Act in 1999, precisely predicted the very outcome we are facing today. In fact, Dorgan said “We are, certainly with this piece of legislation, moving toward greater risk. We are almost certainly moving toward substantial new concentration & mergers in the financial services industry —— moving toward inheriting much greater risk in our financial services industry. I think in ten years time we will look back and say we should not have done that” [bold added].
Republican Senator Phil Gramm is the “Gramm” in Gramm-Leach-Bliley. He was the one that spearheaded the legislation. You might remember Gramm from the John McCain Presidential campaign where he served as McCain’s senior economic adviser. One year after the legislation was passed, UBS, a Swiss bank, acquired Paine Webber, a 120 year old American stock brokerage & management firm. Two years later Gramm became vice-president of UBS investment banking division. Not that he’s much different than any other politician, Republican or Democrat, but the direct impact Gramm personally had on the disaster we face today reminds me of the one Republican Representative Billy Tauzin had on the Medicare Part D program in 2003 — the program that covers prescription drugs for the elderly.
The video below is from today with a clip of Senator Dorgan’s words ten years ago.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky