The Financial Modernization Act of 1999, or Gramm-Leach-Bliley Act, was enacted 10 years ago this week with the expectation that it would create many financial services supermarkets — single companies that offered a combination of insurance, banking and securities products and services.
Industry experts and local bankers said all it did was allow a handful of the country's biggest banks to get even bigger and play a significant role in the current banking crisis.
The effect on locally based banks, they said, has been nil.
"I can't think of anything that it changed," said Tom Page, CEO of Emprise Bank.
Emprise, for example, didn't rush out to buy any insurance agencies or securities firms.
And the act's effect was nowhere as deep as changes to other federal banking laws, such as interstate banking.
"For community banks, this is not in the top 10" of legislation that changed the banking landscape, Page said.
"We are the very same bank today... that we were before," said Trish Minard, CEO of Southwest National Bank.
But the act did have some effect, even locally. It helped insurance company State Farm add banking to its product lineup.
And in Kansas, a few nationally chartered banks, like Salina-based Sunflower Bank, acquired insurance agencies.
Rick LeCompte, finance professor at Wichita State University, said the main impetus for the law was to allow a handful of the nation's biggest banks to compete globally. They would gain access to greater capital through mergers with and acquisitions of large insurance companies, investment banks and securities firms.
"American banks were too small to compete internationally," LeCompte said.
"Supposedly that was going to give us this huge diversification, stability," LeCompte said. "The problem is they (banks and financial services companies) went into things most people didn't expect."
Those things, he said, were mortgage-backed securities and collateralized debt obligations, instruments that are partly to blame for the current banking crisis.
Lax credit standards and oversight by regulators were also to blame, he said.
"All these things got aligned at the same time," LeCompte said.