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What kind of impact will the regulatory overhaul have? Ask us in 2020

By David Cho

It's hard to know what impact the regulatory overhaul passed by Congress on Thursday will have on the markets and the economy. The legislation's supporters hailed it as a landmark bill that will protect consumers, rein in risky activity and allow the economy to get back on track. Its critics say it either doesn't go far enough or puts too many onerous regulations on corporate America that will choke growth.

It's impossible to know who's correct right now. But it may be instructive to look back at the comments from the last big regulatory overhaul in 1999 called the Gramm-Leach-Bliley Act. This law not only deregulated the banking industry, it specifically avoided oversight over the trading of exotic instruments such as derivatives. Some of its key backers included Clinton administration Treasury Secretaries Robert Rubin and Lawrence Summers. Summers had a big hand in crafting the bill that was approved this week.

In 1999, Summers hailed Gramm-Leach-Bliley as "a system for the 21st century" that "will better enable American companies to compete in the new economy."

Other Democrats at the time decried that bill. Sen. Byron L. Dorgan (D-N.D.) hauntingly warned: "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 . . . of safety and of soundness."

That was quite a prediction from Dorgan. Sometimes it takes a decade to prove a prophet's prediction.

By Mike Shepard  |  July 15, 2010; 7:58 PM ET
 
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Comments

Perhaps 10 years from now another bill will deregulate the industry, and history will repeat itself.

Posted by: Anonymous | July 15, 2010 10:42 PM | Report abuse

Perhaps the retiring Dorgan will be appointed to head a regulatory board to make sure GOP style deregulation doesn't happen again.

Posted by: Anonymous | July 15, 2010 10:53 PM | Report abuse

How apropos. All it took was a decade of de-regulation to prove that the Depression suffered in the 1930s can happen at anytime. I am specifically and explicitly saying we should be in a Depression-style era right now, but the ARRA bill prevented that from happening. That's why this is "only" the worst recession since the Great Depression.

Posted by: thelongblueline | July 16, 2010 5:37 AM | Report abuse

Anonymous the article above says nothing of Repubs. they were all Dems so what are you talking about ?

Posted by: Anonymous | July 16, 2010 9:44 AM | Report abuse

Gramm (R) Leach (R) Bliley (R)

Posted by: Anonymous | July 16, 2010 10:06 AM | Report abuse

The new legislation changes NOTHING about how financial institutions do business. It just kicks the can down the road. Prediction: 10 more years of recession/speculation.

Posted by: Anonymous | July 16, 2010 10:14 AM | Report abuse

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