Breaking Glass-Steagall Breaking Glass-Steagall
Although Wall Street has pushed for financial deregulation for two decades, it was last year’s merger of Citicorp and Travelers that set the stage for Congress’s effective revocation of the Glass-Steagall Act in late October. The merger was a violation of the longstanding laws separating banking and insurance companies, but Citicorp and Travelers, because they well knew their power to ram deregulation through Congress, exploited loopholes that gave them a temporary exemption. Indeed, further proving that Wall Street and Washington are two branches of the same firm, the newly formed Citigroup announced only days after the deal that it had hired recently departed Treasury Secretary Robert Rubin as a member of its three-person office of the chairman. With Citigroup’s co-CEO Sanford Weill and lobbyist Roger Levy leading the charge, industry executives and lobbyists badgered the Administration and swarmed the halls of Congress—vetting all drafts before they were introduced—as the final details of the deal were hammered out. Even more than usual, campaign contributions and lobby money greased the deal. The finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors. They laid out more than $290 million for lobbying in 1998, according to the Center for Responsive Politics, and donated more than $150 million in the 1997–98 election cycle—a figure sure to be topped in 1999–2000. For their money, the finance industry bought not only the end of the Glass-Steagall Act but also the partial repeal of the Bank Holding Company Act. These landmark pieces of legislation, recognizing the inherent dangers of too great a concentration of financial power, barred common ownership of banks, insurance companies and securities firms and erected a wall of separation between banks and nonfinancial companies. Now the ban on common ownership has been lifted—and the wall separating banking and commerce is likely soon to be breached. The misnamed Financial Services Modernization Act will usher in another round of record-breaking mergers, as companies rush to combine into “one stop shopping” operations, concentrating financial power in trillion-dollar global giants and paving the way for future taxpayer bailouts of too-big-to-fail financial corporations. Regulation of this new universe will be minimal, with powers scattered among a half-dozen federal agencies and fifty state insurance departments—none with sufficient clout to do the job. The final two major debates over the bill’s provisions focused not on the core-questions of concentrated financial power and regulatory controls but on issues of privacy and lending practices. A coalition ranging from Representative Edward Markey to Senator Richard Shelby denounced the bill for permitting financial conglomerates to share customer information among affiliates, but their attempt to give consumers a right to block such privacy invasions failed. As a result, holding companies will be able to build individual marketing profiles that will include detailed personal data. Gaining this prerogative was a major consideration, as witnessed by the industry’s threats to walk away from the bill if privacy protections were included. The final hurdle to passage of the bill was the Community Reinvestment Act, which obligates banks to provide credit to citizens in minority and low- and moderate-income areas and which is the bête noire of Phil Gramm, chairman of the Senate Banking Committee. Gramm did not succeed in obliterating the CRA, but with the Clinton Administration’s acquiescence, he went a long way toward eviscerating it. Under the conference bill there will be no ongoing sanctions against holding company banks that fail to meet CRA standards. And it will lessen the number of CRA examinations, making it harder for regulators to insure that banks are complying with their obligations to the poor. There is much more that is wrong with the bill: It does not include adequate protections against redlining; it does not require banks to provide basic services to the poor, leaving them at the mercy of check-cashing shops and similar ripoff outfits; and it opens the way for the new conglomerates to gouge consumers. History will record this bill as a landmark in the march toward the consolidation of financial power in America.
Nov 15, 1999 / The Editors
Banning the Ban Banning the Ban
The Senate Republicans' shameful rejection of the Comprehensive Test Ban Treaty was the work of a core of hard-line conservatives led by Senator Jesse Helms.
Oct 21, 1999 / Editorial / The Editors
Labor’s Labors Labor’s Labors
Marking the fourth year of president John Sweeney's tenure, the 13-million-member AFL-CIO had much to celebrate at its biennial convention in Los Angeles in mid-October.
Oct 14, 1999 / Editorial / The Editors
Pat Buchanan’s Poison Pat Buchanan’s Poison
Pat Buchanan, the man who urged Ronald Reagan to visit the Nazi cemetery at Bitburg, is no stranger to charges of anti-Semitism.
Sep 30, 1999 / Editorial / The Editors
Out of East Timor Out of East Timor
On September 19, as the UN peacekeeping force was deploying in the ashes of Dili, our correspondent Allan Nairn was deported from West Timor to Singapore.
Sep 23, 1999 / Editorial / The Editors
Ending Timor’s Ordeal Ending Timor’s Ordeal
Indonesia's scorched-earth compliance with international pressure on East Timor has left Dili, the capital, in ruins, displaced some 100,000 people to refugee camps under the con...
Sep 16, 1999 / Editorial / The Editors
Robbing Russia Robbing Russia
Finally, the rampant corruption at the core of Russia's post-Communist transformation is front-page news.
Sep 16, 1999 / Editorial / The Editors
East Timor’s Agony East Timor’s Agony
With Dili burning and anti-independence militias carrying on a murderous terror campaign beneath the noses of Indonesian soldiers and police, the United Nations prepared to evac...
Sep 9, 1999 / Editorial / The Editors
Beyond the Drug War Beyond the Drug War
Most of the media regard the coy refusal of George W.
Sep 2, 1999 / Editorial / The Editors
Holbrooke’s Time to Lead Holbrooke’s Time to Lead
In assuming his position at the United Nations, ambassador Richard Holbrooke brings his personal access to power, a sharp intelligence and a capacity, unusual in government, to t...
Sep 2, 1999 / Editorial / The Editors