Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 repealed
the Glass-Steagall Act opening up competition among banks, securities
companies and insurance companies. The Glass-Steagall Act prohibited a bank
from offering both Investment, Commercial banking and Insurance services.
The Gramm-Leach-Bliley Act allowed Investment and Commercial banks to
consolidate, for example Citicorp and Salomon.

This act was desired by most of the largest banks, brokerages, and insurance
companies in the country at the time. The main reason being that people
usually put more money in investments in a good economy, but when it turns
bad, they put their money into savings accounts. With the new act, they
would do both with the same company, so the company would be doing well in
all economic times. This has in fact come true, for example with Citigroup
making more income then any other company in the world.

Sen. Phil Gramm led the Senate Banking Commitee which sponsored the bill for
the act, he later joined UBS Warburg, the largest Swiss Bank and the largest
holder of offshore money.

Certain rules still exist which cause some separation between the investment
bank and the commercial bank. For example, the commercial banks aren't
allowed to pay commision to their employees who convince customers to also
use some investment services. They are only allowed to pay them a small fee
for simply setting up appointments to meet with a fincancial advisor.