Gramm’s Test

There is a new reality. Gramm-Leach Bliley has helped bring about the biggest economic collapse since the Great Depression.

Remember the good old days when customers knew their bankers and property owners knew who held their mortgages and the economy did just fine? Remember the good old days when banks were in banking and insurance companies were in insurance and investment firms were in investments?

Main Street insurance agents tried their best to keep it that way, fighting as long as they could in courtrooms and legislative halls across the country against big banks and investment firms and the forces of “progress.” But the well-heeled Wall Street forces — and their political donations — were just too big for Main Street and the insurance agents lobby.

The U.S. Senate voted 90-8 on Nov. 4, 1999 to approve S. 900, the Gramm-Leach-Bliley Act, which repealed the Depression-era barriers that separated banking, insurance and securities. Sen. Phil Gramm, R-Texas, who was chairman of the Senate Committee on Banking, Housing and Urban Affairs, expressed great pride in passage of the bill bearing his name.

“This is a deregulatory bill. I believe that is going to be the wave of the future,” he said.

He was right about the wave, but even he could not foresee what that wave would bring. Gramm set out a test for determining whether his deregulation bill was a success or failure:

“The test that I believe we should use — the test I will use, the test I hope people looking at this bill years in the future will use — is, Did it produce a greater diversity of products and services for American consumers? Were those products better? And did they sell at a lower price? I think if the answer to those three questions is yes, then this bill will have succeeded.”

The answers are no, no, no, Sen. Gramm. The law has done wonders for Wall Street traders and those who created soulless global conglomerates too big to fail, but it has been harmful to just about everyone else.

A proud Gramm continued:

“Ultimately, the final judge of the bill is history. Ultimately, as you look at the bill, you have to ask yourself, Will people in the future be trying to repeal it, as we are here today trying to repeal — and hopefully repealing — Glass-Steagall? I think the answer will be no. I think it will be no because we are doing something very different from Glass-Steagall. Glass-Steagall, in the midst of the Great Depression, thought Government was the answer. In this period of economic growth and prosperity, we believe freedom is the answer.”

There is a new reality. Gramm-Leach Bliley has helped bring about the biggest economic collapse since the Great Depression. While Government may not be the only answer, neither is unbridled freedom for giant corporations. It’s time to revisit Gramm’s pride and joy.