If we want to strengthen the Eagle,
Restore an economy regal,
It’s becoming quite true:
The thing we must do:
Is bring back the law called Glass-Steagle!
How did it happen that Goldman Sachs, and the other large investment banks, came to be playing both ends of the same deal? It happened like this.
In 1999, the Gramm-Leach-Bliley Act was passed. The act repealed part of a law dating back to 1933 called the Glass-Steagall Act. That’s a lot of names in a short time, but the quick version is that Glass-Steagall was passed to control the rampant speculation that had helped cause the collapse of banking at the outset of the Great Depression. Glass-Steagall specifically divided the banking industry so that banks issuing loans, insurance firms providing coverage, and firms offering investments were strictly separated.
Gramm-Leach-Bliley removed those limitations. It also knocked down rules that had placed some limits on bank size, allowing banks to grow larger through acquisition and mergers. Which is why some of these banks became such economy twisting monsters. But the size limits wouldn’t have mattered without the fuel that allowed the banks to grow so large. That fuel was provided by tearing down the walls between loans, insurance, and investments. It’s this, not any single incident at Goldman or anywhere else, was the core reason for the Great Recession.
The Limerick Author is a person with liberal tendencies residing on the left coast, in case you couldn\'t tell. To change this standard text, you have to enter some information about your self in the Dashboard -> Users -> Your Profile box. Tags: Financial Reform, Recession