Those who do not learn from history are doomed to repeat it

I think most people understand that there are multiple factors which contributed to the financial crisis. One of these was the passage of the Gramm-Leach-Bliley Act (GLBA) in 1999, which basically repealed the Depression-era Glass-Steagall Act and allowed banks, securities companies, and insurance companies to directly compete with one another (and leading to the creation of financial conglomerates like Citigroup).

Although the Democrats are far from blameless (several Congressional Dems voted for the bill and Clinton signed it into law), it was the Republicans (who were the majority in Congress at the time) and their crusade to deregulate the markets that were pushing for it. Phil Gramm, a Republican senator from Texas who co-authored the GLBA, said at the time, ''The world changes, and we have to change with it…We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century. Glass-Steagall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer.''

You know, the typical GOP talking points: government, bad; free market, good. As the New York Times noted at the time, “the original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression.” I guess the opponents of the GLBA are looking pretty prophetic right about now, huh? Here’s the money quote from 1999:

''I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010,'' said Senator Byron L. Dorgan, Democrat of North Dakota. ''I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.''

Senator Paul Wellstone, Democrat of Minnesota, said that Congress had ''seemed determined to unlearn the lessons from our past mistakes.''

''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''