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Current Obama Advisors Rushed Clinton to Wall Street Deregulation

Wall Street deregulation was aggressively pushed by advisers to Bill Clinton who have also been at the heart of current White House policy-making, according to Clinton-era documents just released by the Clinton Presidential Library...
April 29, 2014

Wall Street deregulation was aggressively pushed by advisers to Bill Clinton who have also been at the heart of current White House policy-making, according to Clinton-era documents just released by the Clinton 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 allowing banks that take deposits from consumers to engage in risky investment practices and also enter the insurance business.

The resulting Gramm-Leach-Bliley Act in 1999, which replaced the repealed Glass Steagall Act, broadly deregulated banking and securities, but preserved state-based regulation of insurance. As a consequence, the insurance sector largely escaped the 2007-2009 financial meltdown, while the federally-regulated sectors required massive government bailouts.

Clinton’s advisers — including John Podesta, Clinton’s chief of staff and now special adviser to President Barack Obama — repeatedly reassured him that the decision to let Wall Street dismantle regulatory barriers designed to protect the public after the Great Depression simply represented inevitable “modernization.” They also pressed him to make quick decisions, sometimes giving him just three days to decide. A White House staffer once penned a cover note to a memo from then-Treasury Secretary Robert Rubin, which told Clinton: “The attached memo is long, detailed and technical, but you can get the essentials by looking at the first four pages.”

In 2009, Sen. John McCain (R-Ariz.) introduced a bill to bring back the Glass-Steagall Act. McCain’s bill drew the endorsement of the Wall Street Journal, which editorialized in support of “drawing a line between banks that the government effectively guarantees and banks that behave like big hedge funds, experimenting with the latest financial toxins. Hopefully, that day will come before Wall Street decides to take another headlong run at some attractive cliff.”

McCain’s Banking Integrity Act of 2009 – reintroduced in 2013 as the 21st Century Glass-Steagall Act — would reinstate the firewall between consumer banking and investment banking, while also getting banks completely out of insurance.

Wall Street Deregulation Pushed by Clinton Advisers (The Guardian 4/19/14)
Bipartisan Senators Propose 21st Century Glass-Steagall Act (7/16/13)
Wall Street Journal Editorial: Bring Back Glass Steagall (1/12/10)

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