Senator Dodd chose an interesting time to release his financial reform bill. Ten years ago this week, Republicans and Democrats joined hands to gut the Depression-era banking reforms known as “Glass-Steagall.” This helped pave the way for the Wall Street-induced economic disaster we are currently experiencing.
At the time, the reformers were quite pleased with themselves, and celebrated by eating a cake bearing the epitaph of Glass Steagall (!!!) and joking about how average Americans knew nothing about financial reform.
Not kidding. From the November 8, 1999 American Banker:
The reaction on Capitol Hill to passage of the financial reform bill last week ranged from revelry to morbid humor.
To mark the historic occasion, House Banking Committee Chairman Jim Leach played host to a group of his closest collaborators on the bill, including Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Lawrence H. Summers, Comptroller of the Currency John D. Hawke Jr., Treasury Under Secretary Gary Gensler, and Rep. John J. LaFalce, D-N.Y. They joined staff members, lobbyists, and reporters in drinking champagne and devouring a large cake, which bore an epitaph for the Depression-era separation of commercial and investment banking that the bill undoes. It read: ” Glass-Steagall, R.I.P., 1933-1999.”
In explaining how the bill would benefit consumers, Sen. Charles E. Schumer told a press conference that his friends at an Irish pub in Brooklyn rarely ask him, “Hey, Charlie, what’s new with Glass-Steagall?”
Senate Banking Committee Chairman Phil Gramm responded: “You can tell them that Glass-Steagall died.”
To which Sen. Jack Reed, D-R.I. added: “They are going to be upset they didn’t go to the wake.”
Perhaps unwilling to ruin Wall Street’s party, Dodd’s legislation doesn’t come close to re-implementing the Glass Steagall reforms which kept banks from growing “too big to fail.”