Lehman's legacy: What caused the financial crisis

  • Lehman's legacy: What caused the financial crisis

    President Bill Clinton with Vice President Al Gore Present National Performance Review Awards for the Reinventing Government initiative. Andrea Booher/FEMA

    Investment banks and commercial banks became one

    For years leading up to the 2008 collapse, financial firms and their lobbyists in Washington had successfully weakened key provisions of "Glass-Steagall," the law passed in the aftermath of the Great Depression that separated commercial banks from investment banks. Then, in 1999, the entire bill was repealed, and there was nothing to stop banks, whose deposits were guaranteed by the government via the FDIC, from diving into the kind of risky businesses that investment banks specialized in. Such mergers occurred at the same time that federal regulators were seeing their staffs and budgets cut. One example of the deregulatory ethos of the time was then-Vice President Al Gore's National Performance Review, popularly known as the Reinventing Government initiative, which pushed regulatory agencies to treat businesses more like customers and less like industries in need of stringent oversight. As the FCIC put it:


    More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe.
  • Constantine von Hoffman On Twitter»

    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.

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