On the 10th anniversary of Congress voting to repeal the law that had long separated Main Street commercial banking from Wall Street investment banking, current members of the body are talking about ways to potentially bring it back.
A return to the Depression-era law -- known as Glass-Steagall -- is now being seriously discussed. Some leading economists and financial thinkers point to its repeal as a precipitator of the current crisis, because it enabled banks to become "too big to fail."
Consider some of the action on Capitol Hill:
* Rep. Ed Perlmutter (D-Colo.) wants to give federal regulators the power to force big banks to divest themselves of either their commercial or investment arms if they pose a threat to the financial system. House Financial Services Committee Chairman Barney Frank (D-Mass.) reportedly supports the idea.
* Another proposed bill attempts to better equip the government when dealing with such firms and the risks they pose. It would enable regulators to sell off assets, for example, if they were deemed to "pose a threat to the safety and soundness of such company or to the financial stability of the United States."
* A senior Democrat on the House Financial Services Committee, Paul Kanjorski, reportedly wants to "empower federal regulators to preemptively break up financial firms deemed 'too big to fail.'"
* And Rep. Brad Miller, a North Carolina Democrat, is working on a provision that would call for separation between a firm's proprietary trading and investment activities and its traditional banking activities.
The financial services lobby is fighting proposals that would amount to a full or partial return of Glass-Steagall, warning that such action would kill jobs, send top financial companies oversees and generally damage the economy.
Miller doesn't think much of that argument. He notes that for the biggest firms, "the highest-risk, highest-rewards parts of their business were using the entire balance sheet of the firm implicitly as collateral.... And that, to a large extent, is what led to the collapse last fall.
"I'm interested in the idea of creating firewalls," Miller told the Huffington Post, "but if we are maintaining the separation, what's the point of having them in the same holding company anyway? If there's always going to be an implicit use of the assets of the entire holding company, the only way to solve that is for those activities to be off the firm."
Essentially, a return to Glass-Steagall.
On November 5, 1999, when Congress passed the bill repealing Glass-Steagall, it was hailed as something that would provide the country with the "opportunity to dominate" the new century.
The bill was the Gramm-Leach-Bliley Act of 1999, and it enabled banks to engage in the kind of activities that had been largely prohibited since the Great Depression. Main Street banks would be able to do what their Wall Street counterparts had always done, and vice-versa. It was celebrated as a match made in heaven.
"This historic legislation will better enable American companies to compete in the new economy," said the treasury secretary at the time, Lawrence H. Summers. He is, of course, now President Obama's top economic adviser.
By contrast, here is former Clinton administration labor secretary Robert Reich today:
No public interest has been served by allowing the casino called investment banking to merge with the traditional intermediary function linking savers to borrowers. In fact, it's caused nothing but trouble.
Separate them, and investment banks would not be too big to fail because they couldn't use commercial deposits, insured by the FDIC, to place big investment bets. Separate them and mortgage lenders couldn't re-sell mortgage debt as securities -- they'd have to bear responsibility for defaults, which would give them an incentive to carefully investigate credit risks before making a loan. Re-enact Glass-Steagall.
Many prominent figures are now calling for a break-up of the big banks, or at least a strong separation between their commercial and investment banking divisions. They include former Federal Reserve Chairman Paul Volcker; Nobel laureate economist Joseph E. Stiglitz; former Citigroup CEO John S. Reed; and the Governor of the Bank of England, Mervyn King.
As current members of Congress look back ten years, it's worth noting that there were some members at the time who were looking ahead, warning of looming disaster. From the New York Times of November 5, 1999:
"'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, and that that which is true in the 1930's is true in 2010,'' said Senator Byron L. Dorgan, Democrat of North Dakota. ''I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.''
Senator Paul Wellstone, Democrat of Minnesota, said that Congress had ''seemed determined to unlearn the lessons from our past mistakes.''
''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''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.''