Securities and Exchange Commission Historical Society

The Mechanics of Legislation: Congress, the SEC and Financial Regulation

Dr. Kurt Hohenstein, Curator
Opened December 1, 2013


© Ron Sachs/Consolidated News Photos/Corbis

When President William Clinton signed the Financial Services Modernization Act of 1999, commonly known as the Gramm-Leach-Bliley Act, he called it “historic legislation (that) will modernize our financial services laws” and stimulate “greater innovation and competition in the financial services industry.” 1

At the signing ceremony, U.S. Senator Phil Gramm (R-TX) remarked that “[t]he world changes, and Congress and the laws have to change with it. In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.” He continued, “Today we repeal Glass-Steagall because we have learned that government is not the answer, that freedom and competition are the answers… and I am awfully proud to have been a part of making it a reality.” 2

The act’s title, referring to its primary Congressional sponsors, led casual observers to assume that the law was introduced and passed during the 106th Congress. In fact, the repeal of major provisions of the Glass-Steagall Act took a concerted effort over more than two decades.

Otto Von Bismarck is said to have remarked that, to retain respect for both law and sausage, one should avoid seeing either being made. But the story of legislating is much more intricate, akin to building a complicated clock with lots of moving parts of refined ideas, while dealing with the tug and pull of groups and organizations interested in how laws may affect their members or interests.

Over the years, financial legislation has become increasingly more complicated because our system has grown more complex. From the public’s view, the passage of legislation often appears to have come out of the blue, rapid and responsive to a public outcry for reform. In reality, much of the hard work of drafting bills, conducting hearings, building public consensus and organizing needed votes remains hidden from the public.

An examination of two significant financial laws enacted in the last half-century -- the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA) and the Gramm-Leach-Bliley Act – can provide insight into the process of legislating on financial affairs, and illustrate the reactive and deliberative legislating models.

Financial crises writ large on our national politics act as a catalyst to overcome the organic inertia of government, in what appears as a burst of legislative activity, but which is instead the laborious process of building the clock, toiled over by the hidden and persistent mechanics of the law.



(1) November 12, 1999 Draft remarks by President Clinton at signing ceremony for Gramm-Leach-Bliley Act.

(2) November 12, 1999 Statement of Senator Phil Gramm at Signing Ceremony for Gramm-Leach-Bliley Act.

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