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“You Say Hello – I Say Goodbye”
[By Dr. David Edward Marcinko; MBA, CMP™
]
Isn’t it ironic that Citigroup just announced the merger of its Smith Barney brokerage into Morgan Stanley’s – a first step to jettisoning the “financial supermarket” business model that former CEO Sandy Weill developed in 1998 when he led he merger of Travelers with Citibank? Of course, I say, Requiem in Pace!
The Glass-Steagall Act
According to the www.HealthDictionarySeries.com, the merger circumvented the Depression-era Glass-Steagall Act that separated commercial and investment banking and helped pave the way for the banking behemoths that have been crumbling during the recent Wall Street credit crisis.
What is Was – How it Worked
The Glass-Steagall Act of 1933 established the FDIC and included various banking reforms, some of which were designed to control speculation. Most well known was Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts. Regulation Q, of course, was repealed in 1980. Any remaining provisions that prohibited banks from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act, when it was signed into law by President William J. Clinton.
Never a Fan of GLBA
Glass Steagall was put in place after the great depression to prevent what exactly is happening now. It was a Chinese wall between investment houses and retail banks. Never a fan of the GLBA, I wrote and lectured against it for more than a decade, to the catcalls and hisses of financial advisors and brokerage industry veterans everywhere – so strong were financial industry lobbyists, and Sandy Weill of my hometown of Baltimore, MD.
Conclusion
And so, your thoughts and comments on this Medical Executive-Post are appreciated. Was this a fiasco of the Clinton Administration, and was it a contributing factor in today’s financial meltdown?
In the words of Louis Richard Rukeyser [1933-2006], a family friend from Owings Mills, Maryland; why did we ever say bye-bye to Glass-Steagall?
Conclusion
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Filed under: Alerts Sign-Up, Breaking News, Insurance Matters, Investing, Op-Editorials, Portfolio Management, Risk Management | Tagged: banking, Bill Clinton, Citibank, CitiGroup, commercial banks, FDIC, Glass Steagall Act, Gramm-Leach-Bliley Act, investment banks, Morgan Stanley, Regulation Q, retail banks, Rukeyser, Sandy Weill, Smith Barney, Travelers | 10 Comments »
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