Gramm-Leach-Bliley Act Repeals Glass-Steagall, Enables 2008 Crisis

President Bill Clinton signs the Gramm-Leach-Bliley Act (Financial Services Modernization Act) into law on November 12, 1999, repealing key provisions of the Glass-Steagall Act of 1933 that separated commercial banking from investment banking and insurance. The Senate passes the final bill 90-8 on November 4, 1999, with the House voting 362-57, following extensive lobbying by investment banks and financial services companies. During the 1997-1998 Congress alone, big banks, securities firms and insurance companies contribute over $85 million in campaign contributions including soft money. Senate Banking Committee Chairman Phil Gramm personally collects over $1.5 million from the three industries during 1995-2000: $496,610 from insurance, $760,404 from securities, and $407,956 from banks. The legislation is sponsored by Senator Phil Gramm (R-TX), Representative Jim Leach (R-IA), and Representative Thomas Bliley (R-VA). Top Citigroup officials are allowed to review and approve drafts before formal introduction, leading to the bill being dubbed “the Citigroup Authorization Act.” Treasury Secretary Robert Rubin, while secretly negotiating to head Citigroup, helps broker the final deal. The Act removes barriers prohibiting institutions from combining investment banking, commercial banking, and insurance operations, immediately legalizing the previously illegal 1998 Citigroup-Travelers merger. The repeal eliminates Depression-era safeguards designed to prevent conflicts of interest and excessive risk-taking with depositors’ federally-insured money, directly enabling the bank merger wave and risky practices that will culminate in the 2008 financial crisis, demonstrating how systematic regulatory capture and campaign finance corruption can dismantle fundamental economic protections.