I recently read a piece in the WSJ written by Sen. Phil Gramm defending a piece of legislation from 1999 that has been linked to the present economic crisis, the Gramm-Leah-Bliley Act (GLBA).

GLB repealed part of the Great Depression era Glass-Steagall Act, and allowed banks, securities companies and insurance companies to affiliate under a Financial Services Holding Company. It seems clear that if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with. Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified.

Moreover, GLB didn’t deregulate anything. It established the Federal Reserve as a superregulator, overseeing all Financial Services Holding Companies. All activities of financial institutions continued to be regulated on a functional basis by the regulators that had regulated those activities prior to GLB.

Well said Phil……you remember Gramm from last October when he said that the people were just whining…when the economy was in a nose dive.

In an paper written for the Journal of Economics and Finance this is the critique of the GLBA:

This paper examines the impact of Gramm-Leach-Bliley Act across three main sectors of the financial services industry: commercial banks, insurance companies, and brokerage firms, taking account of the wealth effect associated with the announcement. We find that the law has a differential impact across the financial services industry. All three industries have gained due to this law with commercial banks benefiting most, followed by the insurance industry. Further, the results show that larger firms benefited more in both the banking and insurance industries and exposure to systematic risk was reduced for all sectors of the financial services industry after this regulation passed.

If I recall correctly, Congress is pissed at CEOs because some will not accept responsibility for what they have created…a crisis….and yet some in Congress try to find others to take the rap for bad legislation…seldom do you hear any of them take responsibility for the monsters they create.

This guy is just worried that he will be blamed openly and hurt his chances of staying in the Senate.  As usual, it is all about them personally….never about the screwing they have put on the people.  Listening to these guys just makes a case for early schooling of kids in economics…..then these types of people could not get away with the lies they inflict on the population.