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to cover the cash needed to pay their patrons and they shut their doors. As the credit crisis deepened there was no more available credit for business and individuals to expand private enterprise and the economy contracted into a depression.

Years after the depression several laws were enacted to regulate the financial services industry in an attempt to curb lax oversight. The new laws laid the foundation for the Securities and Exchange Commission (SEC) among other important oversight measures and were passed to protect the integrity of the market and individual investors alike.

The Glass-Steagall of 1933 in particular separated commercial and investment banks. Lawmakers felt this was necessary because they did not want market fluctuations or the inherent risk that investment banks take to affect the average bank depositor in the future. Banks could not longer underwrite stock offerings or extend credit to customers to purchase securities known as margin. This wall between investment and commercial banks would insure that if the stock market declined rapidly it would not put commercial bank deposits at risk. Glass-Steagall also empowered the Federal Deposit Insurance Corporation or FDIC to insure bank deposits up to a certain amount to bolster depositor confidence.

Now that we have set the back drop lets take a look at the current crisis. In 1999, Republican Senator Phil Graham sponsored a bill that repealed parts of the Glass Steagall Act that separated investment and commercial banks. The Republican controlled congress passed the bill with enough votes to over ride a veto by President Clinton. The marriage of investment and commercial banking is dubious because investment banks take on transactions that are considered to be high risk compared to traditional deposit banks.

The housing bubble began as Wall Street began to look at mortgages as a substantial profit center. At one time mortgages were traditionally held by the lending institution or packaged together and then re-sold to investors in the form of bonds. Fannie Mae and Freddie Mac were created to provide a market for mortgages that traditional banks deemed risky and would not otherwise underwrite. As deregulation accelerated investment banks developed a large appetite for all types of mortgages that could be slickly packaged and resold to bond holders around the world. Soon a brisk mortgage market developed as demand accelerated and profits soared.

In the traditional model an underwriter or banker

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