A quick detour

In hearing the financial news lately, I had to make this comment: anyone remember the Gramm-Leach-Bliley Act of 1999, sometimes known as the "Financial Services Modernization Act"? It repealed the Glass-Steagal Act of 1933, which required separate ownership of deposit banks (like Chase), investment banks (like J.P. Morgan) and insurance companies (like AIG). Back in 1999, everyone sure thought that was a great idea: we couldn't have another run on the banks like in 1929! Let's get rid of those outmoded regulations!

Well, turns out those regulations were a good idea. As the Wikipedia entry says (with links to sources):

Economist Robert Kuttner (among others) has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis. Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly".

Aren't you glad we modernized our financial services?

And although Phil Gramm, James Leach and Tom Bliley were Republicans, and the Act passed almost entirely on party lines, it was signed by Bill Clinton. It's precisely because he and his wife were so willing to horse-trade for things like this that I'm glad she's no longer a presidential candidate.