| 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 Ironically, it was not until the end of the century that it finally was repealed. |