What was Clinton's justification for signing the repeal of the Glass-Steagall Act?

[gateley]

And if we do re-enact it (doubtful), what would that do to the Gramm-Leach-Bliley Act?

Thanks.

[Eric J in MN]

1. I don't know about Bill Clinton specifically, but the main argument of supporters...

...was that the economy was so different in the 1990s than in the 1930s that separating savings banks from investment banks and insurance companies was no longer necessary.

Also, that it would be good for consumers to be able to go to a savings bank and buy insurance there.

I didn't agree with those arguments at the time. I was against repealing a law meant to prevent another Great Depression.

[gateley]

3. Thanks. I've just never heard "why" they felt it was a good idea. nt

[Eric J in MN]

5. I listed the justifications.

The real reasons of supporters may have been different.

Such as some people get rich from corporate mergers.

[hvn_nbr_2]

21. Arguments vs. reasons

The arguments for it: just as you said.

The reason for it: corporate greed.

The reason that the economy was different from the 1930s was precisely because of the stabilizing effects of New Deal regulations. By eliminating regulation, they basically decided that they wanted to go back to the 1920s so that greed would have full sway in the economy. The result was, predictably, what would have been another great depression. At this point, we still don't know for sure if "would have been" is accurate or if "is a slower-developing" will turn out more accurate.

Regulate corporate greed. De-regulate private life.

[Junkdrawer]

2. It was called "The Financial Services Modernization Act"...

It seems Europe (especially Britain) was over leveraging their finances, so US bankers wanted to play too....

[gateley]

4. I always understand the motivation is $$$, but how did they explain to us why

it was acceptable to repeal it? Or did they even need to worry about explaining it to us? I know if I heard Clinton (and I was never a doe-eyed devotee) say 'this will be better for us' -- I would have trusted that.

I wonder what he got out of it, if anything.

[Junkdrawer]

6. Well, it's OK to over lever investments because NOW...

we have these things called Credit Default Swaps that mitigate the risks...

And, yes, Greenspan really did say that....

[no_hypocrisy]

7. Ignorant optimism about the economy at the time perhaps.

Clinton was balancing the budget, cutting deficits, adding jobs, stock market only went up . . .

He had Rubin as an advisor and Greenspan was egging him on. Clinton's forte was the constitution, not the economy so he didn't have the experience to analyze the data and challenge it himself.

And it was argued at the time that the 1930's were unique to the American Experience and the destructive elements that predicated that decade no longer existed nor could they be resurrected.

Not to mention, I think Clinton in the back of his mind was hoping that throwing a bone to the rabid republicans would make them back off. Not exactly . . .

[Trillo]

12. Rubin and Greenspan

http://www.nytimes.com/1999/02/11/business/the-debate-over-banking-regulation-reopens.html

...Mr. Greenspan has endorsed proposals that would require diversified financial companies to be structured with separate entities under one holding company. The Federal Reserve now regulates bank holding companies and would continue to do so under these proposals, which are part of Mr. Leach's bill.
...
...Mr. Rubin, in supporting Mr. LaFalce's measure today, reiterated his long-held position that financial conglomerates should be allowed to provide services like securities underwriting or merchant banking through subsidiaries of parent commercial banks.
...
Moreover, as a matter of corporate bookkeeping, the structuring of securities or insurance departments as subsidiaries of banking operations would mean that they would contribute to the banks' bottom lines.

[LeftHander]

8. This was REPUBLICAN legislation

Democrats rolled over and the GOP threw them a bone on this one too.

[Nikki Stone1]

17. With enough Democratic support that a Clinton veto could have been overridden.

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

[louis-t]

20. Just as NAFTA was. Remember the freeper types in the '90's?

"He's stealing our thunder!1!!1!"

[LeftHander]

9. Democrats rolled by being given free pork in the bill

After the Democrats got a bone they lined up behind the bill and created a veto proof majority.

The first votes were right along party lines...after some politics the Democrats used it to get some needed social program funding and they caved to Republicans.

[notesdev]

10. Ask Larry Summers

he was there

[sharesunited]

11. Here's the timeline and attribution of influence courtesy of PBS Frontline:

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

[HughBeaumont]

13. "Dow 36,000". Economic neo-libs, and all that.

Economy was going gangbusters. What goes up must always go up. Greed, greed, greed is GREAT. Phil Gramm'z uh jeeeeen-yus.

Then, 2000 came, Al Gore chose Holy Joe Lieberman and subsequently ran away from the positives of Clinton. A few Republican plants here, a few instances of election fraud there . . .

Tiiiiiiiiim-berrrrrrrrrrrrr . . . .CRAAAAASSSSHH!!

Like clockwork.

[Better Believe It]

14. Here's President Clinton's statement and the Senate vote

Here's how the Senators voted on the final bill that President Clinton signed into law.

U.S. Senate Roll Call Votes 106th Congress - 1st Session

as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate

Vote Summary

Question: On the Conference Report (S.900 Conference Report )
Vote Number: 354 Vote Date: November 4, 1999, 03:30 PM
Required For Majority: 1/2 Vote Result: Conference Report Agreed to
Measure Number: S. 900
Measure Title: An Act to enhance competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, and other financial service providers, and for other purposes.
Vote Counts: YEAs 90
NAYs 8
Present 1
Not Voting 1

Grouped By Vote Position

YEAs ---90
Abraham (R-MI)
Akaka (D-HI)
Allard (R-CO)
Ashcroft (R-MO)
Baucus (D-MT)
Bayh (D-IN)
Bennett (R-UT)
Biden (D-DE)
Bingaman (D-NM)
Bond (R-MO)
Breaux (D-LA)
Brownback (R-KS)
Bunning (R-KY)
Burns (R-MT)
Byrd (D-WV)
Campbell (R-CO)
Chafee, L. (R-RI)
Cleland (D-GA)
Cochran (R-MS)
Collins (R-ME)
Conrad (D-ND)
Coverdell (R-GA)
Craig (R-ID)
Crapo (R-ID)
Daschle (D-SD)
DeWine (R-OH)
Dodd (D-CT)
Domenici (R-NM)
Durbin (D-IL)
Edwards (D-NC)
Enzi (R-WY)
Feinstein (D-CA)
Frist (R-TN)
Gorton (R-WA)
Graham (D-FL)
Gramm (R-TX)
Grams (R-MN)
Grassley (R-IA)
Gregg (R-NH)
Hagel (R-NE)
Hatch (R-UT)
Helms (R-NC)
Hollings (D-SC)
Hutchinson (R-AR)
Hutchison (R-TX)
Inhofe (R-OK)
Inouye (D-HI)
Jeffords (R-VT)
Johnson (D-SD)
Kennedy (D-MA)
Kerrey (D-NE)
Kerry (D-MA)
Kohl (D-WI)
Kyl (R-AZ)
Landrieu (D-LA)
Lautenberg (D-NJ)
Leahy (D-VT)
Levin (D-MI)
Lieberman (D-CT)
Lincoln (D-AR)
Lott (R-MS)
Lugar (R-IN)
Mack (R-FL)
McConnell (R-KY)
Moynihan (D-NY)
Murkowski (R-AK)
Murray (D-WA)
Nickles (R-OK)
Reed (D-RI)
Reid (D-NV)
Robb (D-VA)
Roberts (R-KS)
Rockefeller (D-WV)
Roth (R-DE)
Santorum (R-PA)
Sarbanes (D-MD)
Schumer (D-NY)
Sessions (R-AL)
Smith (R-NH)
Smith (R-OR)
Snowe (R-ME)
Specter (R-PA)
Stevens (R-AK)
Thomas (R-WY)
Thompson (R-TN)
Thurmond (R-SC)
Torricelli (D-NJ)
Voinovich (R-OH)
Warner (R-VA)
Wyden (D-OR)

NAYs ---8
Boxer (D-CA)
Bryan (D-NV)
Dorgan (D-ND)
Feingold (D-WI)
Harkin (D-IA)
Mikulski (D-MD)
Shelby (R-AL)
Wellstone (D-MN)

Present - 1
Fitzgerald (R-IL)

Not Voting - 1
McCain (R-AZ)

------------------------------------------------

Statements in support of the bill that repealed the Glass-Steagall Act



FOR IMMEDIATE RELEASE: CONTACT: CHRISTI HARLAN
Friday, November 12, 1999 202-224-0894

GRAMM'S STATEMENT AT SIGNING CEREMONY
FOR GRAMM-LEACH-BLILEY ACT

Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, made the following statement today in a ceremony at the Eisenhower Executive Office Building, where President Clinton signed the Gramm-Leach-Bliley Act into law:

"The world changes, and Congress and the laws have to change with it.

"Abraham Lincoln used to like to use the analogy that old and outmoded laws need to be changed because it made about as much sense to continue to impose them on people as it did to ask a man to wear the same clothes he did when he was a child.

"In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.

"We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom.

"I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality."

-30-

----------------------------------

THE WHITE HOUSE

Office of the Press Secretary

For Immediate Release November 12, 1999
REMARKS BY THE PRESIDENT
AT FINANCIAL MODERNIZATION BILL SIGNING

Presidential Hall

1:37 P.M. EST

THE PRESIDENT: Thank you and good afternoon. I thank you all for coming to the formal ratification of a truly historic event -- Senator Gramm and Senator Sarbanes have actually agreed on an important issue. (Laughter.) Stay right there, John. (Laughter.) I asked Phil on the way out how bad it's going to hurt him in Texas to be walking out the door with me. (Laughter.) We decided it was all right today.

Like all those before me, I want to express my gratitude to those principally responsible for the success of this legislation. I thank Secretary Summers and the entire team at Treasury, but especially Under Secretary Gensler, for their work, and Assistant Secretary Linda Robertson. I thank you, Chairman Greenspan, for your constant advocacy of the modernization of our financial system. I thank you, Chairman Levitt, for your continuing concern for investor protections. And I thank the other regulators who are here.

I thank Senator Gramm and Senator Sarbanes, Chairman Leach and Congressman LaFalce, and all the members of Congress who are here. Senator Dodd told me the Sisyphus story, too, over and over again, but I've rolled so many rocks up so many hills, I had a hard time fully appreciating the significance of it. (Laughter.)

I do want to thank all the members here and all those who aren't here. And I'd like to thank two New Yorkers who aren't here who have been mentioned -- former Secretary of the Treasury Bob Rubin, who worked very hard on this; and former Chairman, Senator Al D'Amato, who talked to me about this often. So this is a day we can celebrate as an American day.

To try to give some meaning to the comments that the previous speakers have made about how we're making a fundamental and historic change in the way we operate our financial institutions, I think it might be worth pointing out that this morning we got some new evidence on the role of new technologies in our economy, which showed that over the past four years, productivity has increased by a truly remarkable 2.6 percent -- that's about twice the rate of productivity growth the United States experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent.

This is not just some aloof statistic that matters only to the Federal Reserve, the Treasury, and Wall Street economists. It is the key to rising paychecks and greater security and opportunity for ordinary Americans. And the combination of rising productivity, more open borders and trade, working to keep down inflation, the dramatic reduction of the deficit and the accumulation of the surplus, and the continued commitment to the investment in the American people, research and development, and new productivity-inducing technologies has given us the most sustained real wage growth in more than two decades, with the lowest inflation in more than three decades.

I can tell you that back in December of 1992, when we were sitting around the table at the Governor's Mansion, trying to decide what had to be in this economic program, the economists that I had there, who are normally thought to be -- you know, you say, well, they're Democrats, they'll be more optimistic -- none of them believed that we could grow the economy for this long with an unemployment rate this low and an inflation rate this low. And it's a real tribute to the American people.

So what you see here, I think, is the most important recent example of our efforts here in Washington to maximize the possibilities of the new information age global economy, while preserving our responsibilities to protect ordinary citizens and to build one nation here. And there will always be competing interests. You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right. And I have always believed that one required the other.

It is true that the Glass-Steagall law is no longer appropriate to the economy in which we lived. It worked pretty well for the industrial economy, which was highly organized, much more centralized and much more nationalized than the one in which we operate today. But the world is very different.

Now we have to figure out, well, what are still the individual and family and business equities that are still involved that need some protections. And the long, and often tortured story of this law can be seen as a very stunning specific example of the general challenge that will face lawmakers of both parties, that will face liberals and conservatives, that will face all Americans as we try to make sure that the 21st century economy really works for our country and works for the people who live in it.

So I think you should all be exceedingly proud of yourselves, including being proud of your differences and how you tried to reconcile them. Over the past seven years, we've tried to modernize the economy; and today what we're doing is modernizing the financial services industry, tearing down these antiquated walls and granting banks significant new authority.

This will, first of all, save consumers billions of dollars a year through enhanced competition. It will also protect the rights of consumers. It will guarantee that our financial system will continue to meet the needs of underserved communities -- something that the Vice President and I tried to do through the empowerment zones, the enterprise communities, the community development financial institutions, but something which has been largely done through the private sector and honoring the Community Reinvestment Act.

The legislation I signed today establishes the principles that as we expand the powers of banks, we will expand the reach of that act. In order to take advantage of the new opportunities created by the law, we must first show a satisfactory record of meeting the needs of all the communities the financial institution serves.

I want to thank Senator Sarbanes and Congressman LaFalce for their leadership on the CRA issue. I want to applaud literally hundreds of dedicated community groups all around our country that work so hard to make sure the CRA brings more hope and capital to hard-pressed areas.

The bill I signed today also does, as Congressman Leach says, take significant steps to protect the privacy of our financial transactions. It will give consumers, for the very first time, the right to know if their financial institution intends to share their financial data, and the right to stop private information from being shared with outside institutions.

Like the new medical privacy protections I announced two weeks ago, these financial privacy protections have teeth. We granted regulators full enforcement authority and created new penalties to punish abusive practices. But as others have said here, I do not believe that the privacy protections go far enough. I am pleased the act actually instructs the Treasury to study privacy practices in the financial services industry, and to recommend further legislative steps. Today, I'm directing the National Economic Council to work with Treasury and OMB to complete that study and give us a legislative proposal which the Congress can consider next year.

Without restraining the economic potential of new business arrangements, I want to make sure every family has meaningful choices about how their personal information will be shared within corporate conglomerates. We can't allow new opportunities to erode old and fundamental rights.

Despite this concern, I want to say again, this legislation is truly historic. And it indicates what can happen when Republicans and Democrats work together in a spirit of genuine cooperation -- when we understand we may not be able to agree on everything, but we can reconcile our differences once we know what the larger issue is -- how to maximize the opportunities of the American people in a global information age, and still preserve our sense of community and protection for individual rights.

In that same spirit, I hope we will soon complete work on the budget. I hope we will complete work on the Work Incentives Improvement Act, to allow disabled people to go to work -- and I know Senator Gramm has been working with Senator Roth and Senator Jeffords and Senator Moynihan and Senator Kennedy on that.

There are a lot of things we can do once we recognize we're dealing with a big issue over which we ought to have some disagreements, but where we can come together in constructive and honorable compromise to keep pushing our country into the possibilities of the future.

This is a very good day for the United States. Again, I thank all of you for making sure that we have done right by the American people and that we have increased the chances of making the next century an American century. I hope we can continue to focus on the economy and the big questions we will have to deal with revolving around that. I hope we will continue to pay down our debt. I still believe in a global economy. We will maximize the opportunities created by this law if the government is reducing its debt and its claim on available capital. So I hope very much that that will be part of our strategy in the future.

But today we prove that we could deal with the large issue facing our country and every other advanced economy in the world. If we keep dealing with it in other contexts, the future of our children will be very bright, indeed.

Thank you very much. I'd like to ask all the members of Congress to come up here while we sign the bill. Thank you. (Applause.)

President Clinton Signs Repeal

[Cass]

15. It passed with a veto-proof margin.

The House and Senate were controlled by republicans at the time, and the final bill passed 90-8.

http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act#Repeal
After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90–8 (one not voting) and in the House: 362–57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999

[Festivito]

19. Exactly. It was just WHEN by days. Better to watch it longer.

Sure, he could have vetoed it, rather than signing it, but that only would have delayed it a little extra time where he, himself, would have less time to see what they were up to before he left office.

So, I'd see why he signed it, rather than a veto or pocket veto.

[pnorman]

16. K & R, mainly to enable me to keep a closer eye on the valuable info on this thread!

n/t

[Nikki Stone1]

18. Citigroup wanted it, got it, and then Robert Rubin went to work for them.

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

"For example, Citicorp (a commercial bank holding company) merged with Travelers Group (an insurance company) in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica and Travelers. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act of 1956 by combining securities, insurance, and banking, if not for a temporary waiver process.<1> The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the "financial services industry".....

....Top Citigroup officials were allowed to review and approve drafts of the legislation before it was formally introduced.<4>

After resigning as Treasury Secretary and while secretly in negotiations to head Citigroup, Robert Rubin helped broker the final deal to pass the bill.<4> He later became one of 3-CEO's that headed up CitiCorp."