Instead of finding the right level of government oversight in a vibrant free market, we’ve let the special interests set the agenda. Changes in the financial landscape, driven by technology and globalization, made the 1930’s era Glass-Steagall Act – the New Deal era law that required that investment banking be kept separate from commercial banking – increasingly inefficient. While reform was desirable, the banking, insurance and securities industries spent over $300 million lobbying Congress to shape that reform to meet their own interests. In the two years before Glass-Steagall was repealed in 1999, financial service industries gave $58 million to congressional campaigns; $87 million to political parties; and spent $163 million lobbying Washington. But though the regulatory structure was outdated, the need for oversight was not. Unfortunately, in the rush to repeal the law to create immediate opportunities for certain Wall Street firms, little effort went into modernizing the government’s supervision of the financial industry – to guard against the potential for conflicts of interest, to insist on transparency, or to ensure proper oversight of new and complex financial products or the dramatic rise of investment banks and non-bank financial institutions, like hedge funds and Structured Investment Vehicles. Nearly a decade later, our financial markets—and everyday Americans—are paying the price.That's part of Obama's campaign statement (pdf) released when he gave his speech on financial regulation last March.
The repeal of Glass-Steagal that he refers to was part of the Gramm-Leach-Bliley Act, which brought about a significant deregulation of the financial market. It was the signature legislative accomplishment of then-Senator Phil Gramm, who is one of McCain's chief economic advisers (the one who said that the problem with the economy is that the U.S. is a "nation of whiners.") Gramm retired at the end of that term and promptly took his payoff in the form a job as lobbyist for one of the investment banks that had pushed for the act.
The Gramm-Leach-Bliley Act passed the Senate, by the way, 54-44 on a nearly party-line vote. Senator Joe Biden voted against it. John McCain voted in favor.
As recently as last March, McCain didn't have any regrets. His prescription for dealing with the crisis at that point was even to push for even more deregulation (!) and to convene a meeting of accountants. Today, as the financial markets tank, more than nine years after he voted for the deregulation act championed by his lobbyist-adviser, McCain is suddenly parroting Obama's call for reform. The problem with this stance is that the guy who would be writing the new financial regulations in a McCain administration would be Phil Gramm! This would be like inviting the fox inside the henhouse to watch over a new batch of chickens, while he still has feathers stuck in his teeth from the last batch of hens he devoured.