One of the main purpose of the antitrust laws are to avoid mergers between companies that could lead to monopolies. Monopolies can eventually lead to the “too big to fail” theory, where companies become so large and important to the economy that government are forced to bail them out in case of an emergency. Since the Great Depression, the government has implemented laws that would prevent another great recession and avoid bailing out these great mergers. One of these laws has been the Glass-Steagall Act of 1933. Unfortunately, bank institutions have been able to go around these laws to merge into large National banks. Banks have also taken advantage of the Gramm-Leach-Bliley act of 1999 which “swept almost six decades of financial service regulations” . The GLB act “repeal[ed] the Glass-Steagall Act’s wall between banks and securities firms, allowing some institutions to engage in commercial banking, securities underwriting and dealing, and insurance underwriting.”
President Franklin Roosevelt’s passed the Glass-Steagall Act of 1933 during the Great Depression in the belief that it would avoid bank institutions from engaging in speculative investments. According to Franklin Roosevelt, “[t]here must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money”. Roosevelt also stated that the Glass-Steagall Act was “the most important and far-reaching legislation ever enacted by the American congress”. Why, then, would the government repeal the act? After the home mortgage crunch, there has been speculation that deregulation would benefit the economy and many are questioning the GLB act.
History has a funny way of repeating itself more than once; in many ways the American capital markets crisis has many similarities to the Great Depression issues. According to Joseph Karl Grant in his article, How the Gramm-Leach-Bliley Act contributed to the 2008-2009 American Capital Markets Crisis, the Gramm-Leach-Bliley act was one of the factors that lead to the crisis of 2008-2009. Grant states that the GLB act “marked the end of regulation that addressed the perceived defects in the banking system thought to have caused the Great Depression”. Grant points out that the deregulation of the GLB act allowed Citigroup and Bank of America to become “too big to fail”.
At first, supporters of the GLB act believed it would give consumers more choice by creating a “one-stop shopping for financial consumers”. There were major concerns with passing the GLB act, but they were ignored by a majority vote by the Senate and House of Representatives. One major critic that emphasized the “too big to fail” doctrine was Senator Byron Dorgan. At the time, he...