Byron Dorgan on the 1999 Financial Modernization Act
By Barry Ritholtz - October 2nd, 2008, 12:30AM
In 1999 Congress passed the Financial Modernization Act, which allowed banks, insurance companies and investment houses to merge. Many experts point to it as one of the causes of our current financial crisis. At the time, Byron Dorgan was one of the few senators to speak out strongly against the legislation. Looking back, his predictions in 1999 seem prophetic and, looking forward, his views raise more questions about the $700 billion bailout plan.
Video after the jump
Source:
Byron Dorgan’s Crystal Ball
Lagan Sebert
American News Project, Oct 01, 2008
http://americannewsproject.com/node/135
American News Project
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October 2nd, 2008 at 12:48 am
What we learn from history is that we don’t learn from history.
October 2nd, 2008 at 1:11 am
This commentary is surprising given that last I saw, Mr. Ritholtz SUPPORTED the bailout.
October 2nd, 2008 at 1:42 am
The fundamental argument against the bailout is this:
As recently as a few months ago Paulson and Bernanke were assuring us that both the economy and the financial system were fine (even though people like Barry and Nouriel Roubini and others were saying otherwise)
Now that they have been proven wrong it means that they are either incompetent or were intentionally misleading the American people. Either way they have 0 credibility at best and at worse represent a clear and present danger to the United States of America.
October 2nd, 2008 at 1:54 am
Dorgan may be right on this issue, (maybe this is a fluke?), but he is otherwise one of those crazy-anti-market-let’s-have-the-government-run-everything Lefties. Not your father’s Democrat. Wasn’t he in favor of the windfall profits tax on oil? One for two at best.
October 2nd, 2008 at 2:17 am
Powerful video. The last words trailing off are also very chilling at the end . . .
“does that diminish the dollar . . . maybe the currency collapses . . . what are the potential consequences of doing this without some notion or some reasonable certainty that this will work?”
In ten years, no doubt, we will be reviewing this video again.
October 2nd, 2008 at 3:26 am
“he is otherwise one of those crazy-anti-market-let’s-have-the-government-run-everything Lefties”
I didn’t realize he was a former wall-street-executive-in-a-time-of-personal-need.
October 2nd, 2008 at 3:45 am
“This commentary is surprising given that last I saw, Mr. Ritholtz SUPPORTED the bailout.”
Is that true?
Or did Barry simply support “Doing something”? Cause, you know, ya gotta DO something!”
October 2nd, 2008 at 4:31 am
The last man to do nothing was Dick Fuld…
October 2nd, 2008 at 4:33 am
Byron Dorgan: El hombre que predijo la crisis dice que el rescate es un error
En 1999 el congreso americano aprobo el plan de modernizacion financiera que permitia a bancos, aseguradoras y casas de inversion a fusionarse – algo que los expertos consideran una de las raices de la actual crisis. Byron Dorgan fue uno de los pocos s…
October 2nd, 2008 at 5:49 am
You need some degree of compartmentalization or internal efforts are focussed on the highest rate of return without serving one’s core markets. By weighting the value of the markets, one can properly allocate resources in a way that minimizes CoVaR to give higher expected returns.
October 2nd, 2008 at 5:58 am
the video is set to self start on arrival … please fix this for us surfers with older/slower equipment
October 2nd, 2008 at 6:09 am
In the past couple of month all of the investment banks have embraced commercial banking. I don’t believe they had a choice. If it weren’t for unnecessary government regulation they would never have been separate entities in the first place.
October 2nd, 2008 at 6:18 am
Your post on Senator Dorgan gave me pause.
There he is again… twice in as many days.
I didn’t know much about Senator Dorgan until briefly tuning in to yesterday’s Senate hearings. He opened the day’s session with the first order of business which was the passage of Bill H.R.7081 / U.S.-India Nuclear Cooperation.
My jaw literally dropped with his recounting of the events of September/01, and how some very real nuclear alarm bells were silently going off at the time. India and the region being the topic, he went on to offer some warnings and predictions about the mismanagement and lack of oversight(!) on the most dangerous weapon we know.
Scary stuff… big picture stuff.
Of course…
…not nearly as scary as the time someone told me about them thar CDS’s!
October 2nd, 2008 at 7:01 am
Yeah, let’s not do anything. The market is SO much smarter and will do SUCH a better job; just reference Andrew Mellon and Richard Whitney for the historical antecedents..
October 2nd, 2008 at 7:40 am
“Of all the offspring of Time, Error is the most ancient, and is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruder’s welcome.”
I always liked that quote.
Thank you Anders Aronsson, for the unintentional reminder.
October 2nd, 2008 at 9:34 am
It’s odd that people so dogmatically confuse mercantilism with free markets, then emphatically voice their opposition to the later. Outside of Glass Steagall being abolished, what other “excessive de-regulations” occurred? Note: not regulating certain entities & products that evolved in the past ten or twenty years does not count as de-regulation. What regulations were abolished & what laws, outside of Glass Steagall, were abolished? Or am I a “wingnut” for even asking this question?
Regards,
TDL
October 2nd, 2008 at 9:37 am
Some of us even remember when “First Interstate Bank” was the first bank to operate in more than one state.
October 2nd, 2008 at 9:43 am
No debate, no open committee hearings, complete disregard of constituents’ opinions and interests. No taxation without (real) representation! Vote the stoneheads out in November!
October 2nd, 2008 at 11:40 am
I need to ask a question. Are you people stupid or just in DENIAL? The BAILOUT is leftist socialism!!!!!!! Fanny and Freddy,AIG
all of the BAILOUT. If you stupid Repugs truly believed in Free market capitalism you would be screaming FOUL but you ass wholes make up the rules as you go.
October 2nd, 2008 at 11:40 am
I need to ask a question. Are you people stupid or just in DENIAL? The BAILOUT is leftist socialism!!!!!!! Fanny and Freddy,AIG
all of the BAILOUT. If you stupid Repugs truly believed in Free market capitalism you would be screaming FOUL but you ass wholes make up the rules as you go.
October 2nd, 2008 at 1:18 pm
Dorgan is a moderate Democrat in a very red state. If he were that far left, he wouldn’t get elected. Can the name calling children leave and do their non-productive rants in private? The adults in the room would like to have a conversation. It is time that Americans start have a real exchange of ideas and stop tearing our own country apart. Having an open mind is not the same as have an empty head.
October 2nd, 2008 at 1:23 pm
Stupid Repugs? Did you say Repug? Well what’s a Repug?
If you could quench your partisan anger for a moment, you would realize that it seems that the average American is AGAINST using tax payer money to bailout those that screwed up.
Paulson thumbed a guess that it would take $700B and all the politicians seem to accept it as fact, instead of first trying to find out what the correct action is and how much it will cost. Then before doling out any of OUR tax money, put a plan in place to make sure that this doesn’t happen again.
Quit taking sides… they want you to take sides so that you will blame the other side without realizing that BOTH SIDES are to blame. A bill will get passed and everyone that has a say in it will get a piece of what they want, but that doesn’t mean you or I will get what we want.
October 2nd, 2008 at 1:25 pm
He looks like Donald Rumsfeld to me.
“one of those crazy-anti-market-let’s-have-the-government-run-everything Lefties” he is not.
1999…that was when we put out http://www.marxist.com/world-economy-perspectives141099.htm
read closely the section “Marx on Credit”.
October 2nd, 2008 at 1:37 pm
Also, don’t forget that CRA ratings were tied to the FMA, in addition to Fannie and Freddy in place to launder that bad debt (and cooking the books). Plenty of blame to be shared by all in charge… but no solutions offered to fix the problems.
October 2nd, 2008 at 3:08 pm
President Clinton disagrees with your view. Allowing banks, investment banks, and insurance companies to merge has helped. Notice that the big splash of failures has occurred in the pure play investment banks and in insurance with AIG.
The act only leveled the playing field with the big international banks that were already merged.
October 2nd, 2008 at 3:12 pm
In Washington not regulating certain entities & products that evolved in the past ten or twenty years counts as de-regulation just as not increasing a budget is a budget cut.
October 2nd, 2008 at 3:39 pm
riley,
That is not the same thing. I was not asking a philosophical question, I was asking for specific actions that were taken by the USG to abolish laws & regs. Non-action, in this case, is not the equivalent of action.
Regards,
TDL
October 3rd, 2008 at 4:23 pm
TDL,
I don’t think it was the removal of provisions of the Glass-Steagal act that caused this problem, as some do. I also don’t believe tha it was the Community Reinvestment Act that caused this problem.
I think that it was having CRA ratings tied to GSA removal (requiring an acceptable CRA rating in order for banks to expand, merge, or acquire) is in part what lead to these toxic securities, then having Fannie and Freddy consume these (and them cooking the books) concealed the problem for a while, and the loosening of GSA allowed for greater exposure.