Congressman John Tierney, with Republican Rep. Walter Jones, has introduced legislation to reinstate certain provisions of the Glass-Steagall Act. I strongly support their proposal. Understanding it requires some background.
Depending upon exactly when we mark the start of the great Wall Street meltdown of 2007 and 2008, we have been assessing its causes (and effects) for about six years. Of course, the reality is — as with most complex historical events — there is no one, tidy event or single date that precipitated the crisis.
Actually, the forces and developments behind the meltdown — those decisions and dynamics that created an unsustainable financial system that finally collapsed — most accurately could be said to have begun 35 years ago during the administration of President Jimmy Carter.
It was during his tenure that he, Congress, the private sector and the courts first started to embrace greater efforts to deregulate industry and private enterprise. Attempting to give businesses and the market more freedom from government control, they reduced or eliminated various regulations on the trucking, railroad, airline and financial sectors.
This was an uneven and often incremental process, and it continued under President Ronald Reagan and every subsequent president until the meltdown started under President George W. Bush. The deregulatory steps in the financial sector were especially arcane and less obvious to the ordinary citizen. Because so many agencies and entities — among them the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve System and the federal courts — are involved in monitoring and interpreting the rules governing banking, lending, investing, trading and hedging, only true policy wonks and insiders follow the regulatory processes closely.
But especially after 1990 or so, the financial sector increasingly enjoyed greater and greater latitude. One of the significant changes that evolved was the slow erosion of the provisions of the Glass-Steagall Act, which had been in place since 1933.