Issue #210

The vampire squid strikes again: The mega banks’ most devious scam yet

Call it the loophole that destroyed the world. It’s 1999, the tail end of the Clinton years. While the rest of America obsesses over Monica Lewinsky, Columbine, and Mark McGwire’s biceps, Congress is feverishly drafting what could yet prove to be one of the most transformative laws in the history of our economy–a law that would make possible a broader concentration of financial and industrial power than we’ve seen in more than a century. But the crazy thing is, nobody at the time quite knew it. Most observers on the Hill thought the Financial Services Modernization Act of 1999–also known as the Gramm-Leach-Bliley Act–was just the latest and boldest in a long line of deregulatory handouts to Wall Street that had begun in the Reagan years. It would take half a generation–till now, basically–to understand the most explosive part of the bill, which additionally legalized new forms of monopoly, allowing banks to merge with heavy industry. A tiny provision in the bill also permitted commercial banks to delve into any activity that is “complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.” Complementary to a financial activity. What the hell did that mean? Matt Taibbi, Rollong Stone, 2-12-14.

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