Archive for December 5th, 2008

Historical facts

The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) and entered into force on January 1, 1934 for the purpose of banking reform. It was created in response to falling stock market when people lost everything. Encouraging people to start saving again and to build confidence in the U.S. banking system, this law imposes stricter capital requirements and depositors bear on its deposit insurance starting at 2,500 dollars worth of coverage. Today, depositors $ 100,000 in coverage of their deposits per account. The Glass-Steagall Act also prohibited any connection between commercial banks and investment banking in order to avoid market speculation and causing future bank failures.

Two separate laws that became known as the Glass-Steagall Act, and both projects were sponsored by Democratic Senator Carter Glass of Lynchburg, Virginia, and former Treasury Secretary and Democratic Congressman Henry B. Steagall of Alabama, which was also the Chairman of the House Committee on Banking and Currency.

• The first glass-Steagall Act was passed in February 1932 in an effort to stop deflation, and expanded the Federal Reserve's ability to offer more types rediscounts assets as government bonds and commercial paper and provide financing to banks or other financial institutions. One of the provisions of the Glass-Steagall Q is the regulation that allowed the Federal Reserve to regulate interest rates on savings accounts. It also prohibited bank holding companies in the property of others financial. For example, a brokerage firm could not owning an insurance company or bank and vice versa.
• The second glass-Steagall Act, adopted on 6 June 1933, was officially named the Banking Act 1933 and introduced the separation of bank types according to their business (commercial and banking investment). Therefore, the FDIC was established and provided depositors and policyholders with coverage.

The repeal of the Glass-Steagall first Law

On 31 March 1980, President Carter signed the Depository Institutions Act

Deregulation and Monetary Control Act of 1980, the Federal legislation more important

related to the financial community since the 1930s. The act has nine titles covering a wide range of subjects, including reserve requirements, access and pricing of the services of the Federal Reserve, and a gradual elimination of Regulation Q and new powers for savings institutions.

Repeal of the Glass-Steagall Act second

The bill that ultimately repealed the Act in its entirety, was introduced in the Senate by Phil Gramm (R) of Texas and House of Representatives by Jim Leach (R) of Iowa, Tom Bliley (R) of Virginia who was known as the Gramm-Leach-Bliley. Passing this bill gave control to banks, securities firms and insurance companies jointly owned subsidiary which was previously prohibited by the Glass-Steagall Act Law For example, Citicorp (a commercial bank holding company) merged with Travelers Group (insurance company) in 1998 to form Citigroup conglomerate a company that combines banking, securities and insurance services under a house brands including Citibank, Smith Barney, and Travelers Primeria. This combination was announced in 1993 and completed in 1994. The Gramm-Leach-Bliley Act established the Federal Reserve as umbrella supervisor. The new law was in direct opposition the objectives of the Glass Steagall Act and Bank Holding Company Act of 1956 that prevented the combination of securities, insurance and banking. The Gramm-Leach-Bliley Act was passed to legalize these mergers on a permanent basis, now known as the "financial services industry. The bills were approved by a Republican majority, and legislation was enacted by President Bill Clinton on 12 November 1999. This victory for the banking sector, which worked actively since 1980 to have the Glass-Steagall Act now repealed had unprecedented power in uncharted territory.

Conclusion

Co-author Elizabeth Warren of the full value of your: The Ultimate Money Plan of Life (Free Press, 2005) (ISBN 0-7432-6987-X) is one of five independent experts who form the Congress of the Monitoring Group Relief Program Troubled Assets, said that the repeal of this law contributed to the global financial crisis of 2008-2009.

Leslie Senator Byron Dorgan (D) North Dakota has been and is one of the few national political leaders, he said, and now is saying that deregulation of the financial system, enacted by Clinton 12 November 1999 was a terrible mistake.

Sen. Byron May 6, 1999 on the deregulation of 1999, said, "This bill, in my opinion, increase the likelihood of future massive bailouts from taxpayers. "The New York Times reported that Senator Dorgan said," I think we will look back in 10 years time and say he should not have done this, but we did because we forgot the lessons of the past, and that is through the 1930s is true in 2010.

The year before the repeal, the sub-prime loans were only five percent of all mortgage loans. The repeal allowed the creation of mortgage banking products that were aggressive in nature without any sense of the subscription. When the credit crisis peaked in 2008, subprime loans were close to thirty percent.

As a mortgage bank and have extensive knowledge of the Glass-Steagall Act 1933 and repealed it in 1999, I conclude that repealing Glass-Steagall Act had a direct negative impact and was a major contributor to the fall financial markets in 2008-2009. The subsequent boom in the sub-prime market allowed many unqualified persons to become homeowners and loans are loaded with ridiculous made available by aggressive product greedy financial institutions invented to fill their own pockets, without notice to prospective homeowners. The laws previously guarded against such indiscriminate practice conveniently disappeared. Many unscrupulous agents, brokers and lenders worked together to draw huge profits, while owners would unknowingly thought they were getting a piece of the American dream. The laws governing the separation institutions dealing with capital markets and the traditional deposit taking and working capital finance markets must exist for creating stability, accountability and protection against economic disaster as a recurrence.