Bailout Watch: How Big Finance bought deregulation in 1999
There are many events that set us on the path to the current crisis on Wall Street, but one is a steady march of deregulation in the finance sector over the last generation.
The Center for Responsive Politics looks at the last time Congress took up the issue of finance regulation, the 1999 Financial Services Modernization Act. The act rolled back provisions in place since 1933, when Congress -- led by Virginia's Carter Glass and Alabama's Henry Steagall -- passed, and FDR signed, the Glass-Steagall Act which kept regular consumer deposit banks separate from riskier investment banks.
That all changed in 1999 with the Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act from its sponsors (Phil Gramm of Texas, Jim Leach of Iowa, and Tom Bliley of Virginia). After years of fierce lobbying by finance interests, Gramm-Leach Bliley shattered the firewall between commercial banks and investment banks, opening the door to bigger banks and higher risk.
A look back at that debate, which was over the 1999 Financial Services Modernization Act, reveals that campaign contributions may have influenced the votes of politicians who, a decade later, are now grappling with the implosion of the giant banks they helped to foster. [...]What does that mean for our current crisis? OpenSecrets shows how much the finance industry has contributed to current leaders in Congress. As Ellen Miller at the Sunlight Foundation notes:
The finance, insurance and real estate sector contributed more than $86 million to members of Congress between 1997 and the key vote on Gramm-Leach-Bliley in November 1999. ... [O]n average, those lawmakers voting "yea" received about $180,000 in campaign contributions from individuals and PACs in the financial sector during that period. Those who voted "nay" received about $90,000 each, or half of what supporters got.
Nine years ago, lobbyists for the financial sector succeeded at enticing Congress to do the bidding of their financial clients resulting in exposing the American taxpayer to huge risk. Those same lobbies are now feverishly working many of the same politicians to cover their clients' collective tails and handing the astronomical bill to each of us. "Whether campaign contributions will again correlate to congressional votes remains to be seen," Massie writes. I would wager that there is unlikely to be much speculation on that question.
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Chris Kromm
Chris Kromm is executive director of the Institute for Southern Studies and publisher of the Institute's online magazine, Facing South.