Deregulation Meltdown Caused By Republicans

FDR comes into the White House around March 1933

· Economy Act of 1933 - enacted March 20, 1933 - cut the salaries of federal workers and reduced benefit payments to veterans, moves intended to reduce the federal deficit in the United States.

· Emergency Banking Act of 1933 - enacted March 9, 1933 - allowed a plan that would close down insolvent banks and reorganize and reopen those banks strong enough to survive. The act also provided for the reopening of banks after federal inspectors had declared them to be financially secure.

· Glass-Steagall Act of 1933 - enacted June 16, 1933 - introduced the separation of bank types according to their business (commercial and investment banking), and it founded the Federal Deposit Insurance Corporation for insuring bank deposits.

· Gold Reserve Act of 1934 - enacted January 30, 1934 - outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in Fort Knox and other locations. The Act also changed the nominal price of gold from $20.67 per troy ounce to $35 per ounce.

Republicans involvement in banking

· President Richard Nixon announced in 1971 that the United States would no longer convert dollars to gold at a fixed value, thus abandoning the gold standard for foreign exchange (see Nixon Shock).

· Gramm-Leach-Bliley Act of 1999 - enacted November 12, 1999 - repealed part of the The Glass-Steagall Act. Allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers . The bill was created by Phil Gramm (Republican of Texas) and in the U.S. House of Representatives by Jim Leach (R-Iowa).

Deregulation meltdown examples –

Wachovia Merger’s that failed!!

(Golden West Financial)

Wachovia agreed to purchase Golden West Financial for a little under $25.5 billion on May 7, 2006. This acquisition gave Wachovia an additional 285-branch network spanning 10 states. Wachovia greatly raised its profile in California, where Golden West held $32 billion in deposits and operated 123 branches.
While Wachovia Chairman and CEO G. Kennedy "Ken" Thompson had described Golden West as a "crown jewel", investors did not react positively to the deal at the time. Analysts have since said that Wachovia purchased Golden West at the peak of the US housing boom. Golden West's mortage-related problems led to Wachovia suffering writedowns and losses that far exceeded the price paid in the acquisition, ending up in the fire-sale of Wachovia to Wells Fargo.

(A.G. Edwards)

In the first quarter of 2007, Wachovia reported $2.3 billion in earnings, including acquisitions and divestitures. However, in the second quarter of 2008, Wachovia reported a much larger than anticipated $8.9 billion loss.
On June 02, 2008, Wachovia Corp, chief executive officer, Ken Thompson was pushed out as head of Wachovia. The board of the Charlotte-based bank said it asked Thompson, 58, to retire and replaced him on an interim basis with Chairman Lanty Smith. Smith had already replaced Thompson as chairman last month in a move the bank said "strengthens independent leadership" at the company.