This week marks the 10th anniversary of the passage of the of the Gramm-Leach-Bliley act (passed on Nov. 12 1999). This financial "reform" act helped to sow the seeds of the recent financial crisis by effectively repealing the Great Depression-era Glass-Steagall act of 1933. The Glass-Steagall act had separated lending and investing for many decades after combining both activities in the same financial institution had led abuses that threatened the stability of the financial system and worsened the Great Depression. The financial "reform" act passed 10 years ago this week allowed for consolidation between commerical banks, investment banks, and insurance companies, blurring the distinctions between lines of business and regulatory oversight. The unintended outcomes of this transformation was an explosion in the volume of mortgage originations and the use high amounts of leverage by investment banks that ultimately threatened the stability of the financial system.

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/Weekly_Market_Commentary_11_9_09.pdf