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JULY 24, 2002
7:13 PM
CONTACT:  Institute for Public Accuracy
Sam Husseini, (202) 347-0020; David Zupan, (541) 484-9167
Interviews Available on Economic Crisis:
* Banking Industry * 401(k)s and Pensions
WASHINGTON - July 24 -

    Executive director of the Financial Markets Center, Schlesinger said today: "New information about the role of large financial holding companies in the Enron debacle raises questions about the effects of the Gramm-Leach-Bliley Act (GLBA), a 1999 law that completed the repeal of the Glass-Steagall Act and permitted firms like Citigroup and JP Morgan Chase to combine banking, securities and insurance operations under one roof. The dealings between Enron and its banks also highlight another key question: Where were the regulators? This question applies most directly to the Federal Reserve, which received umbrella supervision authority over all financial holding company activities under GLBA." The Financial Markets Center web site -- -- contains an overall critique of GLBA written at the time President Clinton signed the law. Also see:,

    Professor of economics at the University of Massachusetts at Amherst and author of the forthcoming book Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity, Pollin said today: "The fraud and accounting scandals are not the cause of the financial crisis, but rather a consequence of it. No one seemed to care about loose accounting practices as long as the stock market was going up. Only when investors realized that stock prices were not going to continue to go up, and they had to rely on earnings, did it become apparent that the earnings were simply not there. The stock prices were at historical highs at the end of the 1990s, even if the bogus profit numbers had been true. Historically, the average price-earnings ratio is about 15:1. In 1999, it was about 42:1 based on companies' reported earnings. One of the major factors in driving the bubble was the deregulation of financial markets. For example, Clinton's Treasury secretary, Robert Rubin, presided over the deregulation of the banking industry. Now he's heading up Citicorp. The type of fraudulent activity that corporate leaders have engaged in would clearly have been far more difficult within a reasonably functioning regulatory environment."

    Director of policy strategies at the Pensions Rights Center, Friedman said today: "It's crucial that any legislation on 401(k)s do the following: limit over-concentration of employer stock in 401(k) plans; hold company officials accountable for their unlawful actions; require worker representation on 401(k) plan boards of trustees; assure that 401(k) trustees are insured if a court finds that they acted unlawfully; and provide whistle-blower protection for employees who protest unlawful 401(k) actions...."


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