too big to fail

Yglesias, among others, links to this 1999 NYT article about deregulating the financial industry. Some Dems come out looking like anti-Nostrodomii:

''Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,'' Treasury Secretary Lawrence H. Summers said. ''This historic legislation will better enable American companies to compete in the new economy.''

''The concerns that we will have a meltdown like 1929 are dramatically overblown,'' said Senator Bob Kerrey, Democrat of Nebraska.

''If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world,'' said Senator Charles E. Schumer, Democrat of New York. ''There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive.''

So how'd that work out? The first and foremost priority should've been to ensure that U.S. financial firms remained solvent.

It pains me to realize that a lot of the blame for our current woes lie squarely at the feet of the Democrats (I'm looking at you, Larry Summers), who aided and abetted the Republican agenda.  By-and-large, they supported the Futures Trading Act of 1982, which legalized derivitive trading, like credit default swaps (championed by guess who? Larry Summers!). And, as Times article points out, they were outspoken in their support of GLBA, which allowed the financial industry to consolidate to the point where they could get "too big to fail. And now, of course, many of these same Democrats are supposed to fix the mess (still looking at you, Larry). It's all very frustrating.

At least there were a few Dems with enough foresight to buck the unfettered free-market zeitgeist.

''I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010,'' said Senator Byron L. Dorgan, Democrat of North Dakota. ''I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.''

Senator Paul Wellstone, Democrat of Minnesota, said that Congress had ''seemed determined to unlearn the lessons from our past mistakes.''

''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''

Also, Larry Summers. Kind of a dick. Bad move, Obama.