Clinton and the "Act" that did us all in

There was an Act in the 1930s and there was another act in the 90s. Both cancelled each other out and in the process gave this world "The Recession". I am talking about the Glass-Steagall Act.

It was put in place to prevent the prodigal investors (investment banks) from getting their hands on an unlimited supply of depositor's money (commercial banks). Basically, financial transactions are driven by two parties with very distinct motivations:

A: The party that wants to lower their risk. They are in the business of lowering the risk on behalf of people who can't afford or don't want to take the risk. They want to conserve their wealth so that they can continue to do what they are good at. They may not make much of a return. 

B: The party that wants to take the risk and in the process expects a return on it. They are in the business of representing people who understand that there are no guarantees and they may end up losing more than they make. And that's fine by them.

Doesn't take an economist to see that it is extremely dangerous when the boundaries of A and B start to merge. The Glass-Steagall Act came up as a result of a market crash in 1933 and when it was finally put to sleep in '99 - it resulted in the mother of all crashes. But at least we didn't need a world war to come out of it :)

Soon after Citicorp became Citigroup (and started pumping cash in the relevant pockets), Clinton finally gave in and repealed the Act. A couple of years ago, I actually helped them (more like one brick in the Great Wall of China) sell off Smith Barney 10 years after they brought it under their infamous "umbrella". After getting rid of the Glass-Steagall Act, the conflict of interest was officially forgotten. The guy who who guards your money also insures your risks and takes a pile of additional risk (and huge pile lately). 

Now that I have the unmatched power of hindsight, I can say - it was only a matter of time. This happens to be one of the main (if not the biggest) reasons that brought us to the brink of financial ruin.