Phil Gramm, the former U.S. senator who helped write the 1999 law that enabled the creation of financial giants such as Citigroup Inc. (C) and Bank of America Corp., said his legislation didnâ€™t make the system any riskier.
The Gramm-Leach-Bliley Act repealed the 1933 prohibition against federally insured depository institutions combining with securities firms and insurers. While his law allows deposit- taking banks to affiliate with securities firms through holding companies, depositors and taxpayers are protected because affiliates canâ€™t take capital out of the banks, Gramm said in a telephone interview yesterday.
â€œI donâ€™t see any evidence that allowing them to affiliate through holding companies had anything to do with the financial crisis nor has anybody ever presented any evidence to suggest that it did,â€ said Gramm, 70. Companies that failed such as Lehman Brothers Holdings Inc. â€œtended to be narrowly focused.â€
Sanford â€œSandyâ€ Weill, who created Citigroup and pushed for the Gramm-Leach-Bliley Act, said yesterday on CNBC that he would now support dismantling financial holding companies.
â€œWhat we should probably do is go and split up investment banking from banking,â€ Weill, 79, said in the interview. â€œHave banks do something thatâ€™s not going to risk the taxpayer dollars, thatâ€™s not going to be too big to fail.â€
John Reed, who helped found Citigroup with Weill, and former Merrill Lynch & Co. CEO David Komansky have said they regretted fighting to overturn the Depression-era Glass-Steagall Act. Richard Parsons, speaking two days after ending his 16-year tenure on the board of Citigroup and one of its predecessors, said the repeal contributed to the financial crisis.
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