Posted by: Maurice Hinchey (September 26, 2008, 02:50 PM)
I have long pointed to the Gramm-Leach-Bliley Act of 1999, which repealed the Glass-Steagall Act of 1933, as the source of much of the deregulation of the financial markets, which has led to the current financial crisis. Glass Steagall was put in place in order to keep investment banks separate from commercial banks. I was one of just 57 members of Congress to vote against the Gramm-Leach-Bliley Act. That bill essentially enabled both banks and investment firms to offer financial services. The bill allowed banks to not only sell mortgages, but also to take those mortgages and put them in risky investment schemes. I agree with many economists who have now concluded that the current sub-prime mortgage crisis came about as a result of this legislation.
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April 16, 2008 -- U.S. House of Representatives Appropriations Subcommittee on Financial Services and General Government Hearing with Securities and Exchange Commission Chairman Christopher Cox.
Congressman Hinchey: "And I think the main reason for that is the deregulation legislation, which was passed by this Congress and which opened up the ability for a number of financial operations to engage in practices which are not overseen by the government, and that is particularly true of hedge funds.
"I think that we need is to go back to regulation. Senator Grassley has introduced a piece of legislation in the Senate which would begin to move us in that direction."
"And I think a decline in the economy is primarily driven by the manipulative way in which investments have been engaged in, including the incorporation of large amounts of these mortgages into these hedge fund investments."
"One of the things that we have seen recently is a statement by the Energy Information Administration and a brief quote is, 'Weakness in the U.S. economy has led to softening gasoline demand.' And we know that is true. The demand has gone down because of the fact that there is a weakness in our economy, and particularly people throughout the middle class are having a very difficult time meeting their daily obligations, whether it is energy, food, whatever it might be."
"And a large amount of the increase in the price of energy, particularly oil, is going up based upon hedge funds intruding themselves in there and investing in those commodities. I have to laugh a little bit when I say intruding themselves in there because I mean they are gree and open to do that. There is no regulation against them. THey can just do it in whatever way they want to.
"But you do think that we ought to have some sort of regulation on these kinds of investments to ensure that people aren't doing this or these funds aren't doing it in ways that are making it more and more difficult to ordinary people to be able to drive their car back and forth to work, feed their family, all of the things that people are having a difficult time doing in this country today?"
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