The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54â44 vote in the Senate[12] and by a bi-partisan 343â86 vote in the House of Representatives.[13] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90â8 (one not voting) and in the House: 362â57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999.[14]
The banking industry had been seeking the repeal of GlassâSteagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the cases for and against preserving the GlassâSteagall act.[8]
The argument for preserving GlassâSteagall (as written in 1987):
1. Conflicts of interest characterize the granting of credit â lending â and the use of credit â investing â by the same entity, which led to abuses that originally produced the Act.
2. Depository institutions possess enormous financial power, by virtue of their control of other peopleâs money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.
3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.
4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).
The banking industry had been seeking the repeal of GlassâSteagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the cases for and against preserving the GlassâSteagall act.[8]
The argument for preserving GlassâSteagall (as written in 1987):
1. Conflicts of interest characterize the granting of credit â lending â and the use of credit â investing â by the same entity, which led to abuses that originally produced the Act.
2. Depository institutions possess enormous financial power, by virtue of their control of other peopleâs money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.
3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.
4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).