In late 1999, a Republican congressman held a party in Washington
to celebrate the passing of new legislation destined to
have a profound effect on Wall Street and the entire financial
industry in the United States. Despite the date on the law,
the principle upon which it was based actually had been a cornerstone
of the Reagan revolution 15 years earlier. The party
seemed a bit late.
The centerpiece of the affair was a large cake bearing the
message “Glass-Steagall, RIP, 1933–1999.” Sipping champagne
with one of the new law’s sponsors, Jim Leach, Republican from
Iowa, were Alan Greenspan, chairman of the Federal Reserve
Board, and various Treasury officials and congressmen who had
been instrumental in getting the new legislation passed, finally
repealing the most talked about law of the twentieth century.
After years of failed efforts and false starts, the Banking Act of
1933, as the Glass-Steagall Act was officially known, had been
erased from the books and replaced by the Financial Services
Modernization Act of 1999, the Gramm-Leach-Bliley Act. The
champagne flowed and congratulations were offered by all. Never
before had a law had so many detractors yet been so hard to effectively
replace. The battle against Glass-Steagall began in the 1930s,
revived in the 1960s, and became a major plank in the Republican
platforms of the1980s. Ironically, it was not until the end of the
century that it finally was repealed.