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Gramm-Bliley Act Pros And Cons

815 Words4 Pages

The Glass-Steagall Act came as an acrid medicine to the notorious US financial sector post the ’29 stock market crash. The Commercial and Investment banks were prohibited from mating, risking the depositor’s money, and gambling or securitising rotten assets or loans. Seen as regressive by the overly-ambitious Americans, the Act was kicked-out by Gramm-Leach-Bliley Act ’99 that permitted the unison of commercial & investment banks, unperturbed at all levels, allowing them further to risk the depositor’s money by turning it into Collateralised Debt Obligation(s). With 2008 Crisis, history had repeated itself. Goldman Sachs, and all the banks alike were upholders of deregulation of this kind. Continuing from Bush’s policy to gift every Joe …show more content…

The Gramm-Leach-Bliley Act gave banks the authority to underwrite. This gave both, power and great responsibility to the investment banks since they became the reps of those CDO’s (which were at core bad debts of incapable homebuyers). They did not flag the reality to their investors till the last day (final date of crash), moreover, iced it with Triple-As. They stood for service and honesty towards their clients but knowing the shallowness of the investment they only sought to insure …show more content…

It slapped a fine of half a billion on Goldman Sach’s in July, 2010. The bank admitted on floor that it rubbed out important information from the Abacus subprime-mortgage derivative it had vended 3 years ago, also acknowledged the role of John Paulson (Hedge Fund mgr.) in choosing securities that went to synthetic CDOs. SEC accused Goldman on breaching sub-section 2 & 3 of Section 17(a) of the Securities Act, both of which are easy to prove without any proof of intent or so of fraud, unlike Section 17(1a) & Section 10(b) of Exchange Act (which were initial complaints of Plaintiffs). This changed the nature of GS’s violation from fraud to “misleading” sales due to omission of information, thus, saving grace for Goldman’s repute. It had earned profits of $3.56bn in first 3 quarters of the year, $550mn was a petty fine. If Goldman committed misconduct then, so did the Federal Reserve Chairman, Regulators, Credit-Rating-Agencies, US Presidents, Stalwart-Economists/Analysts, and World’s Financial Moguls. Goldman Sach’s or PlatinumLady Bag’s, anyone would capitalize on unhealthy and unchecked markets. Why surprised when investment banks, as it, did exactly what they are here to do -mint

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