Gramm Leach Bliley Modernization Act of 1999
Gramm Leach Bliley Modernization Act of 1999 History of the GLBA The Gramm Leach Bliley Modernization Act of 1999 is a regulation that Congress passed on November 12, 1999, which attempts to update and modernize the financial industry. The main function of the Act was to repeal the Glass-Steagall Act that said banks and other financial institutions were not allowed to offer financial services, like investments and insurance-related services, as part of normal operations. The act is also known as the Financial Services Modernization Act.The Gramm-Leach-Bliley Act (GLBA), which is also known as the Financial Services Modernization Act of 1999, provides limited privacy protections against the sale of your private financial information. Additionally, the GLBA codifies protections against pretexting, the practice of obtaining personal information through false pretenses.
Senator William Gramm Senator William Philip Gramm, also known as Phil, is a Representative and Senator from Texas. From 1978 to 1983, he served as a Democratic Congressman. Then from 1983 to 1985, Senator Gramm served as a Republican Congressman. Most recently, from 1985-2002, he served as a Republican Senator. After graduating from the University of Georgia in 1964, he continued at U of G to receive his doctorate in 1967. William Gramm was a professor of economics from 1967-1978. During this period, from 1971-1978, he also founded an economic consulting firm by the name of Gramm & Associates.
In 1981, he co-sponsored the Gramm-Latta Budget which implemented President Ronald Reagan’s economic program, increased military spending, cut other spending, and mandated the Economic Recovery Tax Act of 1981.Just days after being reelected in 1982, Gramm was thrown off the House Budget Committee for supporting Reagan’s tax cuts. In response, Gramm resigned his House seat on January 5, 1983. He then ran as a Republican for his own spot in a February 12, 1983 special election, and won. He became the first Republican to represent the district since its creation. Glass Steagall Act Due to the horrific losses incurred as a result of 1929’s Black Tuesday and Thursday, the Glass-Steagall act was created originally during the 1930s in order to prevent bank depositors from additional exposure to risk associated with stock market issues.As a result, for many years, banks were not legally allowed to act as brokers.
Since many regulations have been instituted since the 1930s to protect bank depositors, GLBA was created to allow the financial industry to offer more services. Current Events related to GLBA Due to the recent financial crisis and with concerns about the country’s economic status on the rise, GLBA has attracted its share of criticism. In an earlier statement, President Obama was quoted in the Wall Street Journal as saying that the GLBA helped create the 2007 subprime crisis. Nobel prize recipients Joseph Stiglitz and Paul Krugman have also criticized the Act.In fact, Paul Krugman referred to the co-author, former Senator Phil Gramm, as the “Father of the Financial Crisis. ” Although GLBA is receiving the bulk of the outrage, the true “monsters” in this financial crisis have come from the unregulated brokerage industry and investment banks. Recent Proposals Although it seems to have fallen from new legislation, The Volcker Rule is a proposal to restrict banks from making certain kinds of speculative investments if they are not strictly on behalf of their customers.
Volcker has argued that such speculative activity played a key role in the current financial crisis.The Volcker Rule was first publicly endorsed by President Obama on January 21, 2010. The proposal specifically prohibits a bank or institution that owns a bank from engaging in proprietary trading that isn’t strictly on behalf of its clients, and from owning or investing in a hedge fund or private equity fund, as well as limiting the liabilities that the largest banks could hold. As of February 23, 2010, Congress began to consider a different bill allowing federal regulators to restrict proprietary trading and hedge fund ownership by banks, but not prohibiting these activities altogether. Paul Volcker was earlier appointed as the chair of President Obama’s Economic Recovery Advisory Board, which was created on February 6, 2009.
Works Cited
- “Biographical Directory of the United States Congress”. June 30, 2010 http://bioguide. congress. gov/scripts/biodisplay. pl? index=g000365.”Information Regarding the Gramm-Leach-Bliley Act of 1999″.
- U. S. Senate Commitee on Banking, Housing, and Urban Affairs. June 30, 2010 http://banking. senate.
- gov/conf/.”The Gramm-Leach-Bliley Act”. Electronic Privacy Information Center. June 30, 2010 ;lt;http://epic. org/privacy/glba/;gt;.
