Watch Bill Clinton, Larry Summers, and Phil Gramm Have a Love Fest Over Repeal of Glass Steagall

Michael M. Thomas insisted, correctly, that we post on a wee bit of history unearthed by Daily Bail: a video showing the key actors in the passage of the bill that formally ended Glass Steagall patting each other on the back. Well, almost all of the key actors. Most of the speakers make a point of singling out former Treasury Secretary Bob Rubin as a moving force, along with former New York Senator Al Damato.

Mind you, despite the self-congratulatory tone of this meeting, Glass Steagall was a dead letter when it was formally dismantled. The only reason for taking the final step of tearing it down was that the insurer Travelers had cheekily struck a deal to buy Citigroup, and Glass Steagall stood in the way. Glass Steagall had been breached when Credit Suisse invested in bulge bracket investment bank First Boston in 1988, which enabled the bank to take a majority interest in 1990 as part of a rescue. During the 1990s, financial regulators liberalized the rules under which banks could engage in investment banking activities, to the point that it merely took a little attention to certain structural and accounting niceties for banks to operate largely unfettered.

This clip is a reminder of the ideology that got us into our current mess: rising inequality and debt levels, a global meltdown that led to the greatest looting of the public purse in history, followed by stagnation and deflation that is too widely blamed on the march of technology and not on poor policies and overt corruption. And this thinking is very much alive.

You’ll see Phil Gramm, at the outset, praise “free markets” even though that is an intellectually incoherent notion and depict the New Deal reforms as the result of Depression-bottom lack of faith. At around 12:00, Larry Summers tells the audience how great it is that the Federal government has been running a surplus. In fact, the Federal government acting as a fiscal drag meant some other sector had to dissave, as in borrow and spend, to make up for that to keep the economy from contracting. Since businesses had already gotten in the habit of being overly short-termist, it was consumers who were increasingly taking up the slack. And as we know now, high levels of consumer debt are a negative for growth. Yet that was the driver of the Clinton “prosperity”.

Summers also gives a pean to the fact that big bad government was no longer such a big presence in the financial markets (Treasury bonds outstanding were going down) meant that financial players were out there, doing a marvelous job of allocating. This was two years after Greenspan had already voiced doubts about the dot-com bubble with his “irrational exuberance” remark.

At 14:00, Bill Clinton takes the stage, and at around 16:00, he turns his pitch on how great the economy is. He cites productivity gains that were later called into question (I recall a Barrons article in 1999 or 2000 that identified that all of the productivity gains for the previous period (a quarter? a year?) were entirely due to increases in computer manufacturing, and that in turn was due to hedonic price adjustments. In other words, the Barrons article raised big red flags about the extent of the New Economy productivity miracle.

But even allowing for the fact that some and probably most of the gains were real, you’ll see Clinton try to sell a Big Lie: that productivity gains were tied to increased worker prosperity. As numerous commentators pointed out, that story had stopped being true as of roughly 1976. Businesses once did share the benefits of productivity gains with workers, but as labor bargaining power weakened, kept it for themselves. Clinton continues with his canards, praising “open borders” as keeping inflation low. The mechanism by which inflation is contained is by restricting wage growth. A prosperous, full employment economy will feature strong growth in pay levels, and will at some point lead to pricing pressure (mind you, profit levels in the US are now so far outside historical norms that businesses could go a long way in increasing wages if they weren’t so greedy). So his low inflation story is again at odds with his effort to depict everything as rosy for average workers.

One commentor at Daily Bail pointed out how Clinton later attempted to deny his enthusiasm for shredding Glass Steagall. From Bill Clinton on deregulation: ‘The Republicans made me do it!’ at the Columbia Journalism Review in 2013:

Bill Clinton sat down with Fareed Zakaria last week ….Clinton’s comment about his record on regulation is an actual newsmaker, because it’s a giant whopper:

What happened? The American people gave the Congress to a group of very conservative Republicans. When they passed bills with the veto proof majority with a lot of Democrats voting for it, that I couldn’t stop, all of a sudden we turn out to be maniacal deregulators. I mean, come on. I know Senator Warren said the other day, admitted when she introduced a bill to reinstate the division between commercial and investment banks, she admitted that the repeal of Glass-Steagall did not cause one single solitary financial institution to fail.

This is, to be kind, bullshit….Clinton installed Robert Rubin and Larry Summers in the Treasury, which resulted in the Gramm-Leach-Bliley Act, which officially did in Glass-Steagall and the Commodity Futures Modernization Act, which left the derivatives market a laissez-faire Wild West (not to mention a disastrous strong dollar policy that was a critical and underrated factor in the bubble). He also reappointed Ayn Rand-acolyte Alan Greenspan, who has as much responsibility as anyone for creating the crisis, as Fed chairman—twice….his administration actively encouraged the big deregulatory legislation, and squashed its own dissenters, like Brooksley Born, who saw disaster ahead.

There’s even more detail in the CJR story, in case you’d ever need to cite it to Clintonistas.

The large point is the Clintons have been loyal followers of the Robert Rubin school of thinking, that bankers should run the economy, not just ours but everywhere. And he and his acolytes have been extremely successful in promoting finance-friendly policies around the world. And despite the wreckage of the global financial crisis, there has been little change in either the fealty to neoliberal ideology or the power of financiers. But both are seen as less and less legitimate by broader society, which is a key first step in reducing their influence.

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  1. 1 Kings

    Can never say it enough, SCUMBAGS all.

    Yeah, NAFTA, GATT, Telecom Act, ‘Crime’ Bill, Steagall, CFMA. etc.all because the bad Repubs made me.
    Hey Bill, all you had to do was veto all and we’d still be ‘Great’, as Trump would say. Instead, well, we know you and your wife enjoy the perks, and the power, and the cash, the cash, the cash…

    1. Roger Smith

      That is not even the worst part. He ultimately blamed the citizens for it. What a pathetic piece of trash.

    2. Propertius

      Hey Bill, all you had to do was veto all and we’d still be ‘Great’

      In the case of Gramm-Leach, it’s hard to see how a veto would have made any difference except on a purely symbolic level – it passed both Houses with veto-proof majorities (90-8, with 2 not voting in the Senate; 362-57, with 15 not voting in the House). It’s pretty disingenuous of ol’ Bill to blame those Evil Republicans for it, though, since 84% of Senate Democrats and 75% of House Democrats voted in favor of it.

      Yes, he should have vetoed it anyway.

  2. JoeK

    Can’t watch more than a minute of Larry and 20 secs of Phil. Comparing laws condoning slavery to those protecting working people from the rentiers, enough to make one vomit. There are humans, and there are humanoids, these are the latter. I’ll skip listening to the used-car salesman from AK.

  3. Larry

    And it bears repeating that Obama was nothing but an extension of the Clinton administration as evidenced both in overt policy, double speak, and appointment of Clinton era heads of departments who descended from the tree of Rubin.

    Doublespeak, lies, and mainstream media haigography allow the neoliberal leaders to continue to remain influential across the nation. Closed political systems mean that real outside challenges to the status quo remain very difficult. The rise of Sanders and unfortunately Trump speak to the poor job that our leaders have done since the recent economic collapse and an awakening in the people that the status quo will no longer do. Perhaps after another feckless Clinton administration spars with an increasingly right wing Congress we’ll get an actual change.

  4. James Levy

    I think we miss something if we ignore the post-Soviet collapse as part of this. America was going to rule the world and it was going to do so through control of the global financial system. To do that, it needed mega financial institutions even less transparent and responsible than the IMF and World Bank. An alliance for private sector gain and global dominance more massive than anything Walter Wriston could have dreamed of was created to enhance American power and push the Washington Consensus.

    The American state and American corporations would strengthen and flourish. Millions of Americans would not. They would be the collateral damage in the drive for global domination. The whole Washington duopoly was on board. They neither knew nor cared what the cost would be for average Americans. Hey, given the ideology of the Republicans and Democrats, anyone who could not pull themselves up by their bootstraps (“compete!”) via will (Republican) or education (Democrats) wasn’t worth shit anyway. Welcome to Social Darwinian post-Soviet America.

    1. RUKidding

      Good points which bear repeating. This is a lot of the motivation, and those that are in “the club” have done very nicely. For the proles? Who cares? F*ck ’em.

  5. Alex morfesis

    I would rather be living in philadelphia…bill has always struck me as a modern day version of william claude dukenfield….

    1. John Wright

      For the younger generations reading this , Alex is referring to the legendary comic/actor W.C. Fields, who died in 1946.

      The comparison of W.C to Bill Clinton is apt.

      W.C Fields played the part of a grifter/con-man and gave us such memorable advice as:

      “If at first you don’t succeed, try, try, again”.. Then quit. No use being a damn fool about it”:

      “A rich man is nothing but a poor man with money”

      “Hell, I never vote for anybody, I always vote against”

      “If you can’t dazzle them with brilliance, baffle them with bullshit.”

      “Everybody’s got to believe in something. I believe I’ll have another beer.”

      Here’s some history on the Philly quote: from

      “Here lies W. C. Fields. I would rather be living in Philadelphia.”

      “This was an epitaph Fields proposed for himself in a 1925 article in Vanity Fair. It refers to his long standing jokes about Philadelphia (his actual birthplace), and the grave being one place he might actually not prefer to be.”

      Fields was not fond of Philadelphia.

      My late father was a fan of W.C and liked to quote him from time to time.

        1. fosforos

          How did Clinton screw Sanders? By channeling W.C. Fields: “Never give a sucker an even break”

  6. John Wright

    For Phil Gramm, financial deregulation was a family affair as his wife, Wendy, was heading the Commodity Futures Trading Commission from 1988 to 1993.


    “After a lobbying campaign from Enron, the CFTC exempted it from regulation in trading of energy derivatives. Subsequently, (Wendy) Gramm resigned from the CFTC and took a seat on the Enron Board of Directors and served on its Audit Committee. While on the board of directors she received donations from Enron to support the Mercatus Center.”

    She is now “a distinguished senior scholar at George Mason University’s Mercatus Center, a free-market think tank based in Washington D.C.”

    Wendy Gramm is certainly “distinguished” for derivatives deregulation AND not seeing any problem with Enron’s books while serving on the audit committee.

    1. Mike G

      It would be staggering to count how many billions/trillions of dollars the corrupt crony-capitalist Gramms have cost the American economy while bloviating about “free markets”.

    2. run75441

      I was thinking of Wendy also. Where is Greenspan mentioned in this? It is worth mentioning the Senators who voted against this:

      “Richard C. Shelby of Alabama, voted against the legislation. He was joined by seven Democrats: Barbara Boxer of California, Richard H. Bryan of Nevada, Russell D. Feingold of Wisconsin, Tom Harkin of Iowa, Barbara A. Mikulski of Maryland, Mr. Dorgan and Mr. Wellstone. ”

      and then there is the Cassandra Booksley Born, CFTC Chair who warned against it also.

  7. JEHR

    Nice Onion video. These people are praising a bill (and its precedents) that will bring financial disaster to every saver and pensioner in the western world. Dante was prescient in creating the eighth and ninth circles where the fraudulent and treacherous people reside, closest to Satan himself. The speakers in the video are prime users of Newspeak. Clinton manifests himself as, to quote Shakespeare, ““Thou clay-brained guts, thou knotty-pated fool, thou whoreson obscene greasy tallow-catch!”

    What I never can understand is why politicians (who are the government) attack the government (themselves) as obstructionist and unnecessary to their world because the financiers want to be the government which would mean that all actions and laws would be for the creation of more wealth for the already wealthy–a world of horror which we are now getting a taste of!

      1. WorldBLee

        For anyone who needs translation, the comment above says “There’s a special place in hell reserved for these people.” And indeed, I wish there was!

  8. RUKidding

    Thanks for the post and history lesson. I cannot bear to watch it. Have to watch my blood pressure. But good to keep laying it out there in the hopes that some may actually learn from history.

    I held my nose and voted for Clinton the first time but refused to do so the second time. Won’t do it a third time, either. Gimme a break from these rapacious pillaging Clintons!! Ugh.

  9. Vatch

    Although the final repeal in 1999 of the Glass Steagall separation of banking functions was mostly symbolic, I think it eased the way for the Commodity Futures Modernization Act a year later. That abomination made the regulation of Credit Default Swaps illegal, which was troublesome, to say the least.

  10. Benedict@Large

    One thing I learned very early on and found most, even very smart people never get is that while technicians can be indispensable to a effort’s success, they have to be very carefully bounded, as they are convinced (and very convincing) that the technically perfect word is identical to the perfect world. In a technically perfect world filled with technically perfect people, restrictions such as Glass-Steagall are unnecessary and perhaps even absurd. That’s just not where we live.

  11. shinola

    A tidbit from the late ’90’s: Travelers was one of the companies represented by the insurance agency I worked for at the time. Months before the repeal of GS, the regular Travelers rep. along with the regional VP were making the rounds of agency visits with trunk loads of Travelers logo freebies (pens, mouse pads, mugs, jackets, etc.) Agency personnel were encouraged to take as much of anything they might want because the branded items were now obsolete – a new logo for Travelers/Citi. had already designed and new stuff was already in the works.

    I asked the VP if perhaps this might be premature & his reply was no, the word was out at Travelers that “the wheels have been greased.”

    1. shinola

      The same Travelers VP I mentioned above, a long time insurance man, also opined that the main reason for the merger was so that “Sandy Weil could become the highest paid corporate exec. in the U.S.”

  12. Schofield

    To make life flourish relies on optimizing signaling both biological and money based. Since hardly anybody understands this parasites like the Clinton’s and know-thing’s like Trump get voted into office.

  13. sierra7

    Thx for the great piece…
    Haven’t the stomach to watch the video…
    Even now I can’t watch any of the contemporary news that includes BC…..
    Just thinking of the names in the piece makes me want to scream bloody murder…..
    I felt the same way in 2007 when learning who Obama was bringing into office with him “on his team”…..I said we are now really finished as a nation…..
    Capitalism is a “game”; all games need rules………..
    I believe we have gone too far this time; a totally false supported economy will continue until we will have a collapse that will be horrendous. It will make the Depression look like a picnic. We have not dealt with the elephant in the room: “un-corralled greed”.
    Nice to read all the comments; makes me feel I’m not “alone”.
    (caveat: was a Democrat for years; rebelled in 1980……denounced them as I tried to lead a local Democrat Club group when I learned of Obama’s advisers; went non-partisan)

  14. Jacob

    “This is, to be kind, bullshit….Clinton installed Robert Rubin and Larry Summers in the Treasury, which resulted in the Gramm-Leach-Bliley Act, which officially did in Glass-Steagall and the Commodity Futures Modernization Act, which left the derivatives market a laissez-faire Wild West (not to mention a disastrous strong dollar policy that was a critical and underrated factor in the bubble).”

    The statement is nonsense because it fails to establish a direct cause-and-effect link between or among Clinton, Robert Rubin, Larry Summers and the creation of the Gramm-Leach-Bliley Act. Thank goodness their names are on the act, otherwise it would be difficult to disprove the nonsense that’s being circulated about it. Neither Rubin, Summers nor Clinton wrote the GLB act. It was written by the Republican senators whose names are on the Act: Senators Gramm, Leach and Bliley. It was veto-proof, as Clinton indicates, because the majority of Congress approved it. The article attempts to connect something that’s not connectable and thus fails to convince me that Clinton, Rubin and Summers created the Gramm-Leach-Bliley Act.

    1. 1 Kings

      Last time I checked Presidents, the Secretary of Treasury, and other non-elected scum(Summers) do not ‘officially’ write bills, nor are able to put their names on one. Of course lobbying for it, publicly and private, sitting next to Phil Gramm in some DC restaurant rehearsing the spin, and then gushing over the moment when signing it is a ‘connection’ in the real world.

  15. Phil

    Within the context of present day events, the video is cringe-worthy. I was a Clinton supporter at the time – too busy with work to follow detail. It’s embarrassing to admit that.

    I could never stand Phil Gramm (actually hated him with a passion!) and eventually came to loathe Larry Summers. Clinton is a really smart guy, and I think he really believed a lot of his rhetoric at the time. Clinton was a power broker who didn’t really see everything behind the curtain (no pun intended), or far enough into the future result of his actions (perhaps his major fatal flaw?)

    What the (above) video reminds me of is a scene from a great old Peter O’Toole movie (The Ruling Class), where “Jack” (O’toole) a paranoid madman who believes he is the Second Coming is made the UK’s national leader. O’Toole lets out a gurgle of pure unadulterated madness as he realizes he is IN CHARGE and can finally realize his gargantuan fantasies (man, could O’Toole ACT!) here – (((watch for 20 seconds, then skip to the following BRILLIANT segment)))

    where Jack addresses the House of Lords,seen as mad ‘Jack’ sees them – alternately royal-robed and proper and alternately cobwebbed bunch of mummified corpses, representative of the musty rot of the privilege that Jack will use at his pleasure to realize his mad fantasies.

    Mad, unadulterated,finally realized POWER!! That’s what we’re witnessing in this election cycle in a way that, in reality, approaches the madness of O’Toole’s character.

  16. Felix_47

    Does anyone really think that Bill really knew anything about the consequences. I think he was simply going along with what he was being fed by Rubin et. al. He was more likely focused on who he was going to sleep with next…..and she might have been planted to feed him a little pillow talk to help Weill make his billions.

  17. raoul

    That Sandy Weill has now advocated the separation of investment and commercial banking speaks volumes.

    Could it be that he now realizes he will have to spend ever increasing sums on personal security to protect his ill-gotten gains?

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