The latest…

Democrats and their allies attempted to tie Wall Street’s growing financial crisis to the policies advocated by John McCain’s former senior adviser. The critics are pointing to a 1999 law co-sponsored by then-Sen. Phil Gramm (R-Texas) and that paved the way for consolidation between commercial and investment banks.

Which prompts one of my readers in the financial world to call “horsepuckey.”

One can have many, many opinions on Gramm-Leach-Bliley, but to blame it for our current problems is a stretch in and of itself. That’s a bit like blaming drunk driving deaths on the repeal of Prohibition. But then to blame Gramm solely for the contents of the bill is ludicrous. Even if it had language in it that said “initiate banking self-destruct sequence in 2008,” anyone who knows anything about our legislative process knows that there were 534 other congressmen and women who can alter, add and delete a bill during the process. After that, the President could have rejected the whole thing, but didn’t. Phil Gramm did not dream up that act in his basement one night. (In fact, studies on repealing Depression era banking laws had been happening for years. I’m no economics historian, but I believe it was a cottage industry amongst economists and academics at one point in the 80′s.)
Don’t get me wrong, Phil Gramm was instrumental in getting the bill passed, but the bill passed the Senate 90 to 8. (And only one senator registered as not voting. Any guesses on who the non-voter was? You got it: John McCain!) It passed the House 362 to 57. This was not a squeaker by any stretch. Then it was signed by Bill Clinton. He could have vetoed it, and even threatened to do so, but insisted on language being included in the bill that ensured application of the Community Reinvestment Act (CRA) to the financial institutions that were basically created by the law. (BTW – The deadlock on this amendment was broken by Chuck Schumer and Chris Dodd looking out for Wall Street and insurance companies who stood to gain tremendously under the bill.) When he got his way, he signed the bill amidst much hoopla. In fact, looking back on the process, the biggest worry about the bill was in protecting consumer privacy. There was nary a discussion about undermining the banking infrastructure.

Many liberal bloggers tout Biden’s opposition to Gramm-Leach-Bliley, a claim that is (surprise!) not quite accurate. He voted against the initial version that passed the Senate, but then voted for the conference report (the final version signed into law).

UPDATE: Two more points: first, from Campaign Spot’s Much More Financially Savvy Cousin, the observation, “Gramm-Leach-Bliley, which eliminated the rules that separated commercial and investment banking, is now actually helping to save Merrill Lynch. Bank of America could not buy Merrill if GLB had not taken down the wall.”

Second, the “Leach” in Gramm-Leach-Bliley – former Congressman Jim Leach – is one of the founders of “Republicans For Obama.”