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Even as the Fed helped to stabilize the situation over the weekend, the stock market is down again on Monday morning. What is alarming from our standpoint is that CIT, Lehman, and National City Corporation all are down – by 25 to 31 percent as we write this. Liquidity questions surround Lehman after what we learned from Bear Sterns. Even JPMorgan needed help and considerations from the Fed to buy Bear Sterns for a reported $2 a share.

This issue now goes far beyond the mortgage blues of some lenders. There is no way that crazy wild-eyed mortgage brokers with lax standards could cause worldwide problems like this. President Bill Clinton repealed the Glass-Steagall Act which had prevented the coupling of investment banking and lending. To be exact, on November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One of the effects of the repeal is it allowed commercial and investment banks to consolidate. Economists have criticized the action.

Of course economists criticized the way in which the Bush administration manufactured money by allowing anybody and everybody the opportunity to buy or refinance homes. Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.

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2 Responses

  1. Alternatives to Bail Out - Page 2 - Rancho Murieta, CA Forums says:

    [...] Re: Alternatives to Bail Out Who repealed the Glass-Steagal Act – these two links explain it satisfactory enough for me: Clinton repeal of Glass-Steagall faulty as seen today : Mortgage Blues frontline: the wall street fix: mr. weill goes to washington: the long demise of glass-steagall | PBS Memory serves me Congress wanted everyone of adult age to be able to afford a home – and Congress proceeded to make that happen. Another example of socialism – equalizing the playing field with un-equal quality control measures- disaster. How possible to you believe it is that China, Russia, India and alike are mounting threats on the USA if the USA doesn’t immediately make good on its’ loans? This is the hard reality in my opinion- one tough item for the average US Citizen to grasp. Ridding the capital gains tax- good idea – it’ll place the money back in the hands of the people, where it belongs and will be immediately useful to our economy. The newly elected administration will make a big difference to the US Citizen – frankly I vote to keep the money in the hands of the people and to revert to the proven honor based system that works – through good citizens who earned their freedoms – rather than force tax which has stripping the average disciplined citizen by forcing these citizen’s to support the less than honorable thru force tax with an end run to provide equality to all regardless of honor as a good citizen. [...]

  2. Anonymous says:

    Tuesday, Septemeber 16, 2008…

    The calendar shows 126 days until George Walker Bush walks out of the White House for the last time as President. But historians will look back and say that the Bush Era ended yesterday, September 15th. The day the stock market dropped ov…

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