Skip to content


December 16, 2014



All Americans owe a vote of thanks to their senators and representatives who forged our names as co-signers to the recently passed “spending bill” which contained a provision promising the big Wall Street banks that we will back up their derivatives-trading crapshoots and other gambles with our money. We are upon the president’s promised signature back in the same position we were before the 2007-2008 debacle which brought on the Great Recession when we just narrowly avoided a world-wide depression due to Wall Street crapshoots with derivatives (and associated infractions involving mortgage securities fraud etc.). This soon-to-become law puts us right back to the vulnerable position where we were then.

If you are not afraid for a future in which we have voluntarily relinquished public control over big bank trading on your account rather than their own, then you’re not paying attention. We are now, or soon will be, back in bailout territory. I had trouble going to sleep after hearing that the Senate had not stripped this bank-pandering rider from the “spending bill,” was going to pass it (which it did), and that the president says he will sign it. It may prove to be our worst legislative mistake since the founding of the republic (or perhaps second to the repeal of the Glass-Steagall Act, which if unrepealed would not have allowed all this economic and market-killing mayhem either in 2007 or in the future).

In its worst application (a collapse of the derivatives market and/or a severe downturn of the global general economy), civilization itself could be up for grabs. This enabling rider must be neutered as soon as possible with, for instance, the reenactment of the Glass-Steagall Act of 1933. We have needed a reenactment of Glass-Steagall all along, but with passage of this travesty, our need is now desperate. Whatever happened to the old understanding when a corporation made bad investments that their shareholders shared the loss? How did we taxpayers become guarantors of their market guesswork? In short, how did we get into this act? What’s in it for us taxpayers but the privilege of guaranteeing corporate welfare for decisions we have no hand in rendering?

Here’s how it works with the advent of this new law. When the banking corporation makes good trades and profits, such profits accrue to the benefit of the shareholders (and executive salaries and bonuses). When the banking corporation makes bad trades, you and I backstop their losses. Do we get any of the profits they may have made in consideration for our guarantor status? Not a penny! Our politicians of both stripes have decided that you and I will be on the hook for the success of the big banks and have made this heads they win – tails we lose proposition a matter of law! That’s good public policy?

This bill (soon to become law) contains the seeds of international depression (which does not exclude us) and all that such a catastrophe brings with it (famines, civil commotion etc.). Will this happen? I don’t know; maybe we will luck out and all of the banks’ derivative and other trades will be profitable, but why in the world (other than campaign contributions) are our politicians from both sides subjecting us to such an unnecessary risk when we saw what can happen when so exposed just seven years ago, a disaster from which we have still not recovered? Why? Just who are such politicians representing? I can tell you that they are not representing me.

This rider should never have been in the bill in the first place, and had no business being a “bargaining chip” on a conference table of politicians in any event. There are some things that are sacrosanct and unavailable as “bargaining chips” for politicians, and bargaining away the potential loss of your economy (and perhaps even your country) on some politicians’ conference table under the guise of “compromise” is one of them.

Republicans stuck this toxic rider on a “spending bill” giving the banks the right to use depositors’ funds covered by FDIC (i.e., insured) for crap shooting in trading of derivatives and (presumably) other “trades” (Greek and Argentine and other junk bonds?), and there is a bigger problem now in the derivatives market than there was in 2007, when we almost went under in a global economic collapse.  The derivatives market now contains over 700 trillion dollars in floating paper. Should that market collapse due to factors we cannot know at this point (war, pandemic etc.), and considering that our GDP per annum is under only a mere 20 trillion dollars, then, depending upon the severity of the collapse, would we even have enough resources to again bail out our failing banks? How could we save the banks because they are too big to fail when we don’t have sufficient resources to even save ourselves from  failed state status in a hair-raising depression with millions of bankruptcies and the “full faith and credit of the United States of America” a meaningless expression? Is “saving” the banks more important than saving the country? Does profit for the few supersede our very existence as a nation-state? I hope not.

My jeremiads written to either strip this dangerous rider from the bill or vote nay on passing it at all have failed to influence policy makers and the president says he will sign it in its present form, so it is now incumbent on thinking Americans to work to repeal this section of the soon to be act or otherwise neutralize or neuter its effects. With Republican majorities in the House and Senate, repeal is highly unlikely and bills to neutralize its effects will likely go nowhere, so I think our best opportunity to escape potential disaster is to make the reenactment of Glass-Steagall a campaign issue in the 2016 election and elect candidates who are pledged to support its reenactment. Reenactment of Glass-Steagall (or a substantial version of it) would end the promise of public funds to pay off private indebtedness due to market losses. That’s the way capitalism used to work before we began exchanging corporate welfare for political contributions.

Meanwhile, I can only hope that our regulators will use whatever regulatory authority they have left under the Dodd-Frank Act and other remaining financial legislation after this legislative travesty in keeping an eagle eye on the big banks’ trades and doing whatever they can do to prevent another 2007 catastrophe. We are in a matter of days going to be sitting on a ticking economic time bomb at the mercy of investment decisions in which we were not invited to participate but for which we are not only invited but will soon be mandated by law to participate in sharing losses arising from the decisions of Wall Street bankers. Since we taxpayers have guaranteed Wall Street bankers insulation from loss, we have legalized their irresponsibility in making trading decisions. With nothing to lose, shoot the dice!



From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: