Gelded Age

The Glass-Steagall act was a 1933 United States national law separating investment banking and commercial banking firms. Also prohibited banks from owning corporate stock. It was designed to confront the problem that banks in the Great Depression collapsed because they held a lot of stock.

May 1999 : The Senate approved legislation tonight that would overhaul the nation's financial system, removing barriers largely created during the Depression that have limited the ability of banks, insurance companies and securities firms to expand into one another's businesses.

By a 54-to-44 vote along party lines, the Senate adopted a measure sought by the three industries and written by Senator Phil Gramm, Republican of Texas and chairman of the banking committee. It would repeal the core provisions of the Glass-Steagall Act of 1933 and later laws that industry executives say have made it increasingly difficult to compete with foreign conglomerates unhindered by similar laws.

Administration officials say the President would veto the Senate version because it would dilute requirements that banks make loans to minorities, farmers and others who have had little access to credit. The legislation also contains provisions that have been criticized by Treasury Secretary Robert E. Rubin because they reduce his department's oversight of banks.

October-November 1999 : After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.

On Oct. 21, with the House-Senate conference committee deadlocked after marathon negotiations, the main sticking point is partisan bickering over the bill's effect on the Community Reinvestment Act, which sets rules for lending to poor communities. Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.

On Oct. 22, Weill and John Reed issue a statement congratulating Congress and President Clinton, including 19 administration officials and lawmakers by name. The House and Senate approve a final version of the bill on Nov. 4, and Clinton signs it into law later that month.

Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government?"

Some folks believe repeal of Glass-Seagall had nothing to do with the subprime, housing, credit mess. "The romanticizing of regulation is a noteworthy development, a warning that leasing and collaring the securities industry will be popular. Lobbyists take heed."

Which ever way you lean on federal regulations, where ever you lay the "housing meltdown" blame - rest assured - congress will "investigate" and bail out the big boys on Joe Blow's tab with enough crumbs to Joe to prevent mass revolt.

It's the 21st century Gilded Age : "While the rich wore diamonds, many wore rags. In 1890, 11 million of the nation's 12 million families earned less than $1200 per year; of this group, the average annual income was $380, well below the poverty line. Rural Americans and new immigrants crowded into urban areas. Tenements spread across city landscapes, teeming with crime and filth. Americans had sewing machines, phonographs, skyscrapers, and even electric lights, yet most people labored in the shadow of poverty."

Gilding for the rich, gelding for the rest.