Wednesday, December 29, 2010

No Mumbo, Plenty of Jumbo: Language in the Gramm-Leach-Bliley Act

I finally got around to doing something I’ve been meaning to do for over a year: look up the exact text of the Gramm-Leach-Bliley Act, which (among other things) repealed banking safeguards put in place by the Depression-era Glass Steagall Act.

I figured I’d be up to my armpits in unintelligible legal speak in which the actual “repealing” was couched in incomprehensible terms. Boy, was I surprised:

From the first section of the Gramm-Leach-Bliley Act, titled “Glass-Steagall Act Repeals”:

Here’s the language:
“Section 20 repealed”
“Section 32 repealed”

Section 20 of Glass-Steagall said that banks can’t get involved in securities trading. (From what I understand, the authors thought banks’ playing with stocks and bonds was too risky and helped lead to the Great Depression.) Section 32 said that no bank officer could be officer in a securities-trading company.

In other words, leaders thought it was a bad idea to let banks, which hold depositors’ money, use that money to speculate on stocks and other yet-to-be-invented securities. By 1999, three congressmen -- Gramm, Leach and Bliley -- decided that, on the contrary, it was a good idea.

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