Years ago, a financial advisor friend warned me that the most dangerous economic thing to happen in years had just happened - the repeal of the Glass- Stegall Act. Huh? That's the act that was passed during the Depression to keep banks from becoming speculative entities -- a practice that got us in a bit of hot economic water way back then. (Remember last century? Those guys taking swan dives out their office windows, because all their investments had just gone down the drain? Soup lines?). At the time of the repeal, I hardly paid attention -- even though my Depression Era dad was bemoaning this repeal as loudly as my friend was. I was too busy being excited at the rate our IRAs and other investments were growing.
The GS Act was repealed in 1999, allowing a ball to start rolling that we are seeing the results of today. Banks take your money, bet it on companies who cooked their books, and voila! worldwide economic failure. Okay, so this is simplistic. But other, wiser minds thought it was dangerous to allow banks to speculate. One of them was John Dingell (D-Michigan). Here's what he said about why it was a bad idea to give banks enough rope to hang themselves with -- and why he didn't vote for the repeal:
“[W]hat we are creating now is a group of institutions which are too big to fail. Not only are they going to be big banks, but they are going to be big everything, because they are going to be in securities and insurance, in issuance of stocks and bonds and underwriting, and they are also going to be in banks. And under this legislation, the whole of the regulatory structure is so obfuscated and so confused that liability in one area is going to fall over into liability in the next. Taxpayers are going to be called upon to cure the failures we are creating tonight, and it is going to cost a lot of money, and it is coming. Just be prepared for those events.”
Talk about calling it. Maybe "someone" might listen this time?