TomDispatch | The stock market continued its meteoric rise in anticipation of a
banker-friendly conclusion to the legislation that would deregulate
their industry. Rising consumer confidence reflected the nation’s
fondness for the markets and lack of empathy with the rest of the
world’s economic plight. On March 29, 1999, the Dow Jones Industrial
Average closed above 10,000 for the first time. Six weeks later, on May
6th, the Financial Services Modernization Act passed the Senate. It
legalized, after the fact, the merger that created the nation’s biggest
bank. Citigroup, the marriage of Citibank and Travelers, had been
finalized the previous October.
It was not until that point that one of Glass-Steagall’s main
assassins decided to leave Washington. Six days after the bill passed
the Senate, on May 12, 1999, Robert Rubin abruptly announced his
resignation. As Clinton wrote, “I believed he had been the best and most
important treasury secretary since Alexander Hamilton... He had played a
decisive role in our efforts to restore economic growth and spread its
benefits to more Americans.”
Clinton named Larry Summers to succeed Rubin. Two weeks later, BusinessWeek reported
signs of trouble in merger paradise -- in the form of a growing rift
between John Reed, the former Chairman of Citibank, and Sandy Weill at
the new Citigroup. As Reed said, “Co-CEOs are hard.” Perhaps to patch
their rift, or simply to take advantage of a political opportunity, the
two men enlisted a third person to join their relationship -- none other
than Robert Rubin.
Rubin’s resignation from Treasury became effective on July 2nd. At
that time, he announced, “This almost six and a half years has been
all-consuming, and I think it is time for me to go home to New York and
to do whatever I’m going to do next.” Rubin became chairman of
Citigroup’s executive committee and a member of the newly created
“office of the chairman.” His initial annual compensation package was
worth around $40 million. It was more than worth the “hit” he took when
he left Goldman for the Treasury post.
Three days after the conference committee endorsed the
Gramm-Leach-Bliley bill, Rubin assumed his Citigroup position, joining
the institution destined to dominate the financial industry. That very
same day, Reed and Weill issued a joint statement praising Washington
for “liberating our financial companies from an antiquated regulatory
structure,” stating that “this legislation will unleash the creativity
of our industry and ensure our global competitiveness.”
On November 4th, the Senate approved the Gramm-Leach-Bliley Act by a
vote of 90 to 8. (The House voted 362–57 in favor.) Critics famously
referred to it as the Citigroup Authorization Act.
Mirth abounded in Clinton’s White House. “Today Congress voted to
update the rules that have governed financial services since the Great
Depression and replace them with a system for the twenty-first century,”
Summers said. “This historic legislation will better enable American
companies to compete in the new economy.”
But the happiness was misguided. Deregulating the banking industry
might have helped the titans of Wall Street but not people on Main
Street. The Clinton era epitomized the vast difference between
appearance and reality, spin and actuality. As the decade drew to a
close, Clinton basked in the glow of a lofty stock market, a budget
surplus, and the passage of this key banking “modernization.” It would
be revealed in the 2000s that many corporate profits of the 1990s were
based on inflated evaluations, manipulation, and fraud. When Clinton
left office, the gap between rich and poor was greater than it had been
in 1992, and yet the Democrats heralded him as some sort of prosperity
hero.
When he resigned in 1997, Robert Reich, Clinton’s labor secretary,
said, “America is prospering, but the prosperity is not being widely
shared, certainly not as widely shared as it once was... We have made
progress in growing the economy. But growing together again must be our
central goal in the future.” Instead, the growth of wealth inequality
in the United States accelerated, as the men yielding the most financial
power wielded it with increasingly less culpability or restriction. By
2015, that wealth or prosperity gap would stand near historic highs.
