I doubt that Molly would take any joy, delight, or comfort at being proven right on her insights into the consequences of the 1999 Gramm-Leach Act.
Lordy, Lordy, how I miss her. Here are some highlights from her 26 October, 1999 column:
Which is to say, the new banking bill is a thoroughly lousy idea, and the party most likely to regret it is us.
The 1999 Gramm-Leach Act is about to replace the 1933 Glass-Steagall Act, with the result that bankers, brokers and insurance companies can all get into one another's business. It's a done deal except for the final vote on the conference-committee agreement. The inevitable result will be a wave of mergers creating gigantic financial entities.
In a stupefying moment of pomposity, a New York Times editorial solemnly concluded: "The principle of freer competition is the economic engine of this era. But the other imperative is to demand openness, financial prudence and safeguards so that the vast new concentrations of wealth and power do not create new abuses." When was the last time you saw a vast concentration of wealth and power that DIDN'T create abuses?
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So much money has gone into getting this bill passed during the last 10 years that there is no hope of stopping it.
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Don't get me started on the evidence for my theory that bankers are among the stupidest people on God's green earth. These are the geniuses who loaned all that money to Latin America in the '80s and then had to write it off. This is the system that almost collapsed last year because one hedge fund spiraled out of control — and had to be bailed out by the Fed. These are the clever fellows who didn't notice their banks were being used to launder Russian mafia money.
"Too Big to Fail" will be the new order of the day. And guess who gets left holding the bag when they're too big to fail? One of these monsters goes down, and it will cost as much as the whole S&L debacle.
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Phil Gramm promises us that increased competition will bring about a wonderful world of dandy new services at lower prices. Not a single soul thinks this bill will do anything but cause a tidal wave of mergers and acquisitions, leaving us with fewer options than ever. We'll get fewer and more powerful institutions with the ability to overcharge for products because of their market share.
