Assessing GLBA: Ten years after the "Fall of the Wall" - Practice ...

by CustomerService@sbmedia.com (John A. Tatom)

Ten years after the Berlin wall crumbled, ending the division between much of Eastern and Western Europe, the “regulatory wall” came down on the U.S. financial services industry. Nov. 12, 2009, will mark the 10-year anniversary of the signing of the Gramm-Leach-Bliley Act (GLBA) by President Clinton.

Widely regarded as the most significant piece of financial services regulation to be enacted since the Great Depression, the GLBA — also referred to as the Financial Modernization Act — broke down the barriers that separated cross-sector ownership of, and marketing between, banks, insurance companies, investment banks and securities firms.

Was the tearing down of financial regulatory walls a good thing for the U.S. insurance industry and other members of the financial sector? Did the deregulation facilitate competition and innovation as its authors intended? Networks Financial Institute at Indiana State University will present a conference (see sidebar below) regarding the Act’s impact 10 years after its signing.
Just as the “fall of the wall” in Eastern Europe reflected decades of change on the continent and throughout the world, the enactment of the GLBA reflected decades of change and modernization in the U.S. financial services industry. The GLBA turned back some very restrictive regulatory policies that were enacted during the Great Depression, specifically portions of the Glass-Steagall Act of 1933, which prohibited a bank-holding company from owning other financial companies.

The GLBA was not the first legislation to repeal portions of the Glass-Steagall Act. Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, was repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. In 1987, the Congressional Research Service submitted a report presenting the arguments for and against preserving the Glass-Steagall Act.

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