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WHILE WE SLEEP, OUR WORLD IS AT RISK (PART II)

December 28, 2013

WHILE WE SLEEP, OUR WORLD IS AT RISK (PART II)

Over 500 posts ago, I announced in my first offerings as a blogger that the reason I was starting to blog was because I wanted to see the Glass-Steagall Act reinstated as the law of the land. This 1933 Depression-era law was passed to counter replication of the Wall Street excesses of the “Roaring Twenties” which contributed mightily to the world-wide economic failure of the 30s.

The Act set up a wall of separation between commercial banking and investment banking and worked well as law of the land until 1999, when it was catastrophically repealed on the signature of a Democrat, Bill Clinton, and on the advice of his Treasury Secretary, Bob Rubin (who came to the Treasury Secretary job from chairmanship of a big Wall Street Bank, Goldman Sachs). The Big Six (and others) had been chipping away at Glass-Steagall from the time it was enacted until it was repealed, upon which nirvana was declared on Wall Street as the wall of separation came tumbling down in 1999 and the basis for regulation of the big banks evaporated. President Clinton took the advice of a former CEO of a Wall Street big bank in signing the repeal of Glass-Steagall. He will never make a bigger mistake.

It was by far Clinton’s worst mistake of his eight years in office. He unleashed the genie and his successor’s election the next year promised even less regulation for the big banks. Freed of Glass-Steagall and regulation, and with a Republican named George Bush in office, Wall Street pulled another “Roaring Twenties” trick and very nearly brought the world to another depression with its unregulated sale and other security use of esoteric paper few understood, and when its underlying pooled mortgage and other collateral proved deficient, the world’s economies were on the verge of collapse until you and I bailed out the people who took us over the cliff in 2008.

The banks you and I resuscitated are doing fine these days; we their saviors are not. The Dow and S & P are at historic highs; the rich and corporate class is getting richer at an accelerated rate; multi-billion dollar fines paid by such big banks as JP MorganChase since the crash for losses on the purchase and sale of credit derivatives and (perhaps criminal) accounting for mortgage securities portfolios are pocket change when compared to their gross annual profits. Some of us who bailed them out are relegated to an end of unemployment compensation by Wall Street’s henchmen in the House of Representatives. Others are relegated to a reduction in food stamps as children go hungry in order that the rich and corporate class may avoid taxation. More unshared wealth to the already rich and greedy outsourcers; famine and anxiety for the poor and unemployed. This is policy?

None of the preceding would have happened if Glass-Steagall had not been repealed via Wall Street’s sweet talk to Democrats, who disastrously fell for the line that Wall Street could be trusted since it understood appropriate parameters for conduct and needed no regulation. Republicans were already on board, of course, having long since sold out to Wall Street’s campaign contributions, “good business manners,” and “free trade” cover for freedom from regulation. There is enough blame to go around.

After surveying the economic debris left over from the battlefield of 2008 which brought us to the Great Recession, all caused by repeal of Glass-Steagall, and having lived through the Great Depression, I determined that I had a special duty as a blogger to agitate for the renewal of Glass-Steagall so that America never again would have a 1929 or 2008 experience. Stay tuned for the Volcker Rule.  GERALD  E

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