In 1999 Congress passed the Financial Modernization Act, which allowed banks, insurance companies and investment houses to merge. Many experts point to it as one of the causes of our current financial crisis. At the time, Byron Dorgan was one of the few senators to speak out strongly against the legislation. Looking back, his predictions in 1999 seem prophetic and, looking forward, his views raise more questions about the $700 billion bailout plan.
SEN. BYRON DORGAN (D-ND): —philosopher and author who once said those who cannot remember the past are condemned to repeat it.
TEXT ON SCREEN: In 1999 Congress passed the Financial Modernization Act, which allowed banks, insurance companies, and investment houses to merge. Now many experts point to it as a key culprit of the financial crisis. At the time, one of the few voices of opposition was Senator Byron Dorgan.
DORGAN: I worry very much that the fusing together of the idea of banking, which requires not just safety and soundness to be successful but the perception of safety and soundness—. But to merge it with inherently risky speculative activity is in my judgment unwise. There are some notions that represent transcendental truths, that are true over time, and one of those, in my judgment, I fervently believe, is that we are with this piece of legislation moving towards greater risk. We are almost certainly moving towards substantial new concentration and mergers in the financial services industry. That is almost certainly not in the interests of consumers, and we are deliberately and certainly with this legislation moving towards inheriting much greater risk in our financial services industries. And so I come to the floor to say that I regret that I cannot support the legislation. I think we will, in ten years’ time, look back and say we should not have done that, because we forgot the lessons of the past.
TEXT ON SCREEN: Nine years later… On September 23, 2008, Senator Dorgan warned against passing the $700 billion bailout plan Paulson put before Congress.
September 23, 2008
DORGAN: I don’t believe that we should be stampeded here. People started thinking yesterday, some of the analysts started thinking, well, what if you added the $700 billion on top of all the other guarantees, taking it to $11.3 trillion indebtedness, and just keep pushing money out there? What happens to the value of the dollar? And so does that diminish the value of the dollar? Does it begin to persuade people that maybe this currency collapses? Maybe the electronic herd runs against the dollar? What are the potential consequences of doing this without some notion or some reasonable certainty that this would work?
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