Regulation
During last Wednesday's State of the Union Address, President Obama discussed plans to fine banks, which had, after accepting stimulus funds, awarded sizable bonuses to employees and not fully repaid the American taxpayer. Unfortunately, this minimal planned restriction does nothing to override the sweeping deregulation in the nineties that contributed to the 2008 financial breakdown.
This deregulation was most notably caused by the Gramm-Leach-Bliley Act of 1999, which allowed commercial banks, investment banks, securities firms and insurance companies to combine, making them practically not able to be regulated by the US government. The act also left combination banks free to loan their investment sides money to spend on other endeavors and with the ability to insure themselves- so that if they were ever in need of insurance, they would actually be unable to provide it.
During the hight of the US financial crisis, when the banks were being bailed out, many politicians talked about the banks being 'too big to fail'. The size of the bailed out banks was due to their consolidation with other companies- like Citigroup, which used to just be Citibank- which, in turn, was due to the passage of Gramm-Leach-Bliley. And yet, over ten years and a financial meltdown after it's passage, Gramm-Leach-Bliley is still an applicable piece of legislation.
As President Obama makes compromise after compromise with the still unsupportive Republicans, he cannot allow financial regulation and reform to wait any longer, if he wishes to prevent another banking crash that must be paid for by taxpayers. He can start by asking Congress to retract Gramm-Leach-Bliley.
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This deregulation was most notably caused by the Gramm-Leach-Bliley Act of 1999, which allowed commercial banks, investment banks, securities firms and insurance companies to combine, making them practically not able to be regulated by the US government. The act also left combination banks free to loan their investment sides money to spend on other endeavors and with the ability to insure themselves- so that if they were ever in need of insurance, they would actually be unable to provide it.
During the hight of the US financial crisis, when the banks were being bailed out, many politicians talked about the banks being 'too big to fail'. The size of the bailed out banks was due to their consolidation with other companies- like Citigroup, which used to just be Citibank- which, in turn, was due to the passage of Gramm-Leach-Bliley. And yet, over ten years and a financial meltdown after it's passage, Gramm-Leach-Bliley is still an applicable piece of legislation.
As President Obama makes compromise after compromise with the still unsupportive Republicans, he cannot allow financial regulation and reform to wait any longer, if he wishes to prevent another banking crash that must be paid for by taxpayers. He can start by asking Congress to retract Gramm-Leach-Bliley.
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