John Nichols: 3 from state opposed financial adventurism

John Nichols  —  9/30/2008 5:47 am

From the 1930s to the 1990s, the United States had regulations on the books that were written to prevent the sort of economic meltdown that our economy is experiencing. The Glass-Steagall Act, which was enacted during the first year of Franklin Delano Roosevelt's New Deal presidency, barred the worst sorts of financial adventurism by prohibiting banks from offering investment, commercial banking and insurance services.

In 1999, however, after years of lobbying and campaign contributing by Wall Street interests, Texas Republican Sen. Phil Gramm succeeded in convincing Congress to enact the Gramm-Leach-Bliley Financial Services Modernization Act. That measure eliminated safeguards, allowing commercial and investment banks to begin to consolidate and opening up a race-to-the-bottom competition among banks, securities companies and insurance companies.

Members of Congress were warned at the time that eliminating the Glass-Steagall protections would endanger the economy.

The late Paul Wellstone, then serving as senator from Minnesota, argued, "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."

Congress, Wellstone said, "seemed determined to unlearn the lessons from our past mistakes."

North Dakota Sen. Byron Dorgan was more precise in his warning. "We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness," Dorgan told the Senate. "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."

Who listened? When the final vote on Phil Gramm's measure came on Nov. 4, 1999, in the U.S. House, 362 members voted for it while just 57 voted against.

In the Senate, the vote was even more lopsided -- 90 in favor to 8 opposed.

Among Wisconsin representatives who are still serving, Republicans Paul Ryan, Tom Petri and James Sensenbrenner voted to give the banks what they were seeking. They were joined by Wall Street Democrat Ron Kind. Democratic Sen. Herb Kohl also voted "yes."

"No" votes came from three Wisconsin Democrats: House members Tammy Baldwin and Dave Obey, and Sen. Russ Feingold.

If Wisconsinites are looking for heroes in the muddled debate over who created the mess we're in, they would be wise to begin with the three members of our delegation who got the issue right when it mattered: Baldwin, Obey and Feingold.

John Nichols is associate editor of The Capital Times.

John Nichols  —  9/30/2008 5:47 am