Commentator Response To Section 20 and 32 Repeal
President Bill Clinton’s signing statement for the GLBA summarized the established argument for repealing Glass–Steagall Section’s 20 and 32 in stating that this change, and the GLBA’s amendments to the Bank Holding Company Act, would “enhance the stability of our financial services system” by permitting financial firms to “diversify their product offerings and thus their sources of revenue” and make financial firms “better equipped to compete in global financial markets.”
With Salomon Smith Barney already operating as a Section 20 affiliate of Citibank under existing law, commentators did not find much significance in the GLBA’s repeal of Sections 20 and 32. Many commentators noted those sections “were dead” before the GLBA.
The GLBA’s amendment to the Bank Holding Company Act to permit banks to affiliate with insurance underwriting companies was a new power. Under a 1982 amendment to the Bank Holding Company Act bank affiliates had been prohibited from underwriting most forms of insurance. Because the GLBA permitted banks to affiliate with insurance underwriters, Citigroup was able to retain ownership of the Travelers insurance underwriting business. Overall, however, commentators viewed the GLBA “as ratifying and extending changes that had already been made, rather than as revolutionary.” At least one commentator found the entire GLBA “unnecessary” for banks and suggested the OCC had the authority to grant national banks all the insurance underwriting powers permitted to affiliates through the GLBA.
As John Boyd had earlier, Minneapolis Federal Reserve Bank president Gary Stern and Arthur Wilmarth warned that the GLBA’s permission for broader combinations of banking, securities, and insurance activities could increase the “too big to fail” problem.
Read more about this topic: Glass–Steagall Act
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