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Clinton Presidential Documents on Glass-Steagall Repeal: No Good Reason For Doing This

Posted by Larry Doyle on April 21, 2014 9:44 AM |

I do not think there is any single piece of legislation in the last 50 years that has had such a profoundly detrimental impact on the American public than the repeal of the Glass-Steagall Act separating commercial and investment banking.

That repeal is certainly not the sole factor that led to the economic crisis of 2008 and the ongoing pain we experience today, but it was certainly critical to the eventual meltdown. There is no great revelation in that assessment.

The recent release of documents from the Clinton Presidential Library provides real transparency on the dynamic at play back in the mid to late ’90s that led to the eventual dismantling of Glass-Steagall. Perhaps no surprise that we have yet to see meaningful review of these documents from media outlets on our side of the pond, but the UK-based The Guardian hits these revealing documents hard.

Not that we did not already know that the Clinton administration ushered in the repeal of Glass-Steagall, but we learn some fascinating facts in reviewing both some of the documents and The Guardian’s commentary.  Let’s navigate and see who was really calling the shots:

Wall Street deregulation, blamed for deepening the banking crisis, was aggressively pushed by advisers to Bill Clinton who have also been at the heart of current White House policy-making, according to newly disclosed documents from his presidential library.

The previously restricted papers reveal two separate attempts, in 1995 and 1997, to hurry Clinton into supporting a repeal of the Depression-era Glass Steagall Act and allow investment banks, insurers and retail banks to merge.

The White House papers show only limited discussion of the risks of such deregulation . . . Earlier, in February 1995, newly-appointed Treasury secretary Robert Rubin, his deputy Bo Cutter and senior advisers including John Podesta gave the president three days to decide whether to back a repeal of Glass-Steagall.

Podesta currently works at the White House as special adviser to President Barack Obama. Sperling stood down as director of Obama’s National Economic Council last month.

Along with Cutter, who worked on Obama’s transition committee, all three men were close allies of Rubin, who spearheaded the deregulation of Wall Street before joining the board of Citigroup in 1999. In 2007, he briefly became its chairman.

The closeness of Obama’s team to the deregulation policies of the late 1990s is well known and has been criticised by campaigners as a reason for the current administration’s reluctance to institute more aggressive Wall Street reforms after the banking crash.

But the new documents cast fresh light on the way the White House was first ushered toward deregulation by the tight group of Rubin allies.

A similar apparent attempt to rush president Clinton’s decision-making occurred later in the process, in 1997.

In a letter received by the president on 19 May, Clinton is again given just three days to decide whether to proceed with the deregulation agenda.

While Rubin, Podesta, Sperling, Cutter et al were clearly doing the ultimate bidding of their Wall Street cronies as this repeal worked its way through Congress, a review of a document dated September 2, 1998 is chilling in highlighting one specific point in regard to the repeal of this act:

There is no good reason for doing this. It does not help safety and soundness, and is not necessary for functional regulation.

If in fact there was “no good reason for doing this” — and history has certainly proven that to be an accurate assessment — then how much dough-re-me went into the pockets and campaign coffers of Clinton and others to see that Glass-Steagall was repealed? We know Rubin himself was paid over $100 million by Citigroup.

Is there any doubt that our nation would be far better off if Glass-Steagall had never been repealed? I have no doubt about that, which is why I am a strong proponent that it be reinstated and we break up the large Wall Street banks in the process.

Navigate accordingly.

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

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The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • jrwells5

    Larry – In his 2012 interview with Bill Moyers, John Reed detailed how former Treasury Secretary, Robert Rubin, got his friend, President Bill Clinton, to agree not to oppose Sandy Weill’s outright violation of Glass-Steagall by merging Travelers and Citicorp. Then just weeks before the official repeal of Glass-Steagall, Rubin joined Citi’s board. Reed also talks about obtaining similar non-opposition agreements Fed Chairman Alan Greenspan an Members of Congress.

    A month later and just days before he stepped down as Citi’s Chairman of the Board, Richard Pasons was reported to have blamed the Financial Crisis, in part, on the repeal of Glass-Steagall.

    And to ensure that the culture of hypocrisy was intact, Sandy Weill later admitted that repeal of Glass-Steagall was wrong and shounld be re-enacted.

    Really repulsive stuff.

    Cheers, Jim Wells, Wellspring Consulting International

  • Jim,

    For the personal transfer of wealth of hundreds of millions of dollars into the pockets of said individuals (Rubin, Clinton post-Presidency, Gramm, et al), our nation has borne costs that are immeasurable.

    In my opinion, these men should be held out as exemplars of national shame.

  • Jim O’Gara

    Larry, truly amazing to say the least. Deregulation is the true bane of society especially in this instance.

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