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Split Up The Banks! Restore Glass-Steagall
Ten years ago, the Republican-controlled Congress - egged on by that champion deregulator, former Texas Sen. Phil Gramm - passed legislation that arguably did more to plunge the United States into our crippling great recession than anything else: It repealed the Great Depression era's Glass-Steagall Act.
Then on Nov. 12, 1999, an acquiescent Democratic president, Bill Clinton, signed the repeal into law.
Glass-Steagall stood as a firewall between commercial banks and Wall Street since 1933, when the country's leaders heeded the lessons of the 1929 stock market crash and set in place strict regulations in an attempt to prevent such an economic calamity from happening again.
But the country's financial institutions chafed for decades under Glass-Steagall's restrictions. If only commercial banks could merge with investment banks and insurance companies, they argued, it would be so much better for the nation's economy. Gramm, who infamously insisted that the U.S. had become a nation of whiners when the economy started to tank in the fall of 2008, fought for years to repeal Glass-Steagall and finally got his way. Get government out of the way of the free marketplace, he argued, ignoring the fact that historically conservative banks would be joining the high-risk investment community and all the pitfalls it represents.
The repeal sanctioned the formation of the conglomerate Citigroup, for example, permitting commercial bank Citicorp's merger with Travelers insurance corporation. Citigroup, which now included Citibank, Smith Barney, Primerica and Travelers, combined banking, securities and insurance services under one giant and, as we painfully learned, "too big to fail" financial institution.
That's how we got today's Bank of America, JPMorgan Chase and the many other giants that participated in dicing and slicing subprime mortgages, and traded in complicated hedge funds, derivatives and other financial manipulations, which commercial banks were forbidden to do for more than 65 years.
Now some of the biggies are coming to recognize the peril they and the country are in as a result. Last week, JPMorgan CEO James Dimon called the idea that any bank is too big to fail "ethically bankrupt" and added that regulators should have the power to let them fail.
Even Citigroup's co-founder, John Reed, said earlier this month that he's sorry for creating the monster and that it was a big mistake when the bank merged with Travelers, opening the door to massive risk.
Indeed, Reed said Glass-Steagall should be restored, joining former Federal Reserve Chairman Paul Volcker, who has been trying to convince the Obama administration of the need to return to the act's strict regulation. That would mean breaking up the "too big to fail" institutions and restoring banks to being banks and investment houses to their own businesses.
Breaking up the biggies would go a long way toward returning stability to the broken system, in which taxpayers are asked to save the conglomerates from their own bad behavior and then forced to sit by while the behemoths return to big profits and obscene bonuses.
U.S. Sen. Bernie Sanders, the Vermont independent, has introduced legislation that would require the Treasury Department to identify the so-called "too big to fail" conglomerates and force them to break up within a year.
Meanwhile, the Madison-based Center for Media and Democracy has started a new project called BanksterUSA to rally support for Sanders' legislation and advocate for prosecution of Wall Street executives who purposely manipulated markets for their private gain. Its motto is: "Too big to fail, but not too big for jail!" More information is on its website at www.BanksterUSA.org.
After what we've gone through and what millions of innocent out-of-work Americans are still going through, it truly is time to restore Glass-Steagall and rid ourselves of these "too big to fail" conglomerates.
- Posted in
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30 Comments so far
Show AllThe time to restore Glass-Steagall would have been immediately before the TARP funds were distributed. The Congress failed us badly, again. If the People's voices are absent or ignored in Washington, then why legitimize the corruption and theft with our votes. I believe that withholding one's vote is the single most powerful way that we can de-legitimize the corrupt system. Withdraw your vote and ignore the orchestrated voices of the Chicken Little's.
The time to restore Glass-Steagall would have been immediately before the TARP funds were distributed.
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I agree 100%.
Here we are several years into the crisis and the President won't even say the words Glass-Steagall.
That should tell you without reservation that it ain't coming back anytime soon.
The fix is in.
Again.
Obama, Geithner, Summers, Bernanke, Dimon and the other insiders continue to sell us the delusion that the "biggies" can be managed by token regulation that creates perverse incentives.
Token regulation and Dimon's "let them fail" thesis cannot possibly work. Each of the biggies hold 10% or more of the total money on deposit nationwide. The failure of any organization of that size brings down the whole economy no matter who the regulators are.
You wrote:
"Each of the biggies hold 10% or more of the total money on deposit nationwide. The failure of any organization of that size brings down the whole economy no matter who the regulators are.
_______________________________________________________________________________
You are absolutely wrong. The treausrey gave $700 billions to the banks and the Feds have loaned them trillions so far. I am sure any amount of money held temporarily from circulation by the failure of a bank can be easily substituted easily by the Feds.
In some cases there might not be a need to shut down the bank completely. What will be needed is to fire the management and the FDIC take over and clean it up and if it is to big is to break it up and put back in the market.
Saving the bank doesn't mean you have to save the incompetent corrupt management.!!
if you give up your vote, then you do not exist at all to the politicians
the rich try to demoralize the middle class and the poor so they don't vote
djb, I appreciate your feelings around voting, but it will have little effect. Read my 10:43 post. It's all now a sad illusion. I think after Obama most people are going to truly realize this.
With Obama;
We gave hundreds of billions to Wall Street (A continuation of Bush's give away),
Little is being done to regulate the crooks on Wall Street,
We are still in Iraq,
We are getting ready to escalate the war in Afghanistan,
Jobs are still being shipped overseas,
Big Business lobbies are still running things.
We may get industry friendly health insurance reform that will do little to solve the underlying problems with our health care system.
If we had elected McCain how RADICALLY different do you think things would be from where we are now? The Republicans are just the crazy wing of the one party corporate system that we now live under.
"If we had elected McCain how RADICALLY different do you think things would be from where we are now?"
Well, we would probably have already attacked Iran. Remember, to McCain, the only foreign policy is "shock and awe."
Attack Iran, with what? I think the US is pretty much "Shocked and Awed" out. We attacked Afghanistan which really did not have an army, then we attacked Iraq which had been beaten down by years of massive sanctions, and we see how well those both worked out so far.
Iran is bigger than both those countries and is in a better position to defend itself. Plus it's buddies with the Ruskies and China, who is now our banker/owner.
I'm sure there would probably be some saber rattling but that would be about it. A little bone to throw the base of his party. Both US parties are in place to server the rich and powerful and will not do anything to hurt them. At this point in time if Iraq was attacked you could kiss the world economy goodbye. Because of their geography they probably could make shipping oil through the Strait of Hormuz a bit "challenging".
Now Im not saying there is NO difference between the two wings of our one Oligarchy party, Im just saying on the big issues the differences are minimal.
Choosing not to cast a vote is not giving it up. It is a public strategy that says we do not support you and what you are doing. It also says the con game is over, get out while you can. It is a big step closer to revolution, a very serious warning. It will have the desired result one way or the other.
Notice that there is no mention of "Government" Sachs. According to the link below, Lloyd Blankfein, CEO of Goldman Sachs, claims that he's "doing God's work".
http://www.alternet.org/story/144026/hightower%3A_obscenely_rich_bankers_claim_to_do_god%27s_work_--_they_can_go_to_hell/
JPMorgan CEO James Dimon apparently didn't think that "too-big-to-fail" was ethically corrupt when JPMorgan received $$Billions in bailout money. Could it be that JPMorgan is now feeling threatened by the obvious incestuous relationship between the federal government and Goldman Sachs? Will they be left out of the next bailout frenzy?
Split Up The Banks - All of Them! Restore Glass-Steagall!
Nobody is going to put Humpty Dumpty back together again folks and those of us that believe that are just deluding ourselves. Democracy is a farce in this country, the people can elect whomever they want but the power has shifted away from DC and now resides with Int'l Capitalists. America as an Enterprise is broke and deep in debt to these people and they've ( Wall st.) have also decided that most of us ( America's workforce) are no longer needed. In short America is being systematically dismantled and shipped over seas, its workforce is being shed and its Treasury looted. They should just hoist the Jolly Roger over the Capitol and get on with it all ready.
your right too, lets all give up
Every once in a while when I think it is appropriate I post this little gem from Fascism's very own Mussolini.
"Democratic regimes may be described as those under which the people are, from time to time, deluded into the belief that they exercise sovereignty, while all the time real sovereignty resides in and is exercised by other and sometimes irresponsible and secret forces. Democracy is a kingless regime infested by many kings who are sometimes more exclusive, tyrannical, and destructive than one, even if he be a tyrant."
To some extent this was probably always true in this country, but now it is so blatant, only fools can't see it. "irresponsible and secret forces". That describes Wall Street so well that it is prophetic.
Our country is being destroyed from within, there really is no other way to put it.
obama schumer and barney frank all received some very
heavy envelopes from the banksters. and regardless of what
they spin publicly fat chance of that happening!
your right, lets all give up
Give up on the corrupt system for the time being, but don't give up on yourself and your family. Do what you can to get out of debt and become has self reliant as you can. Things are going to get a lot worse before, (if), they get better.
Corporate money has corrupted our government, and the media, and right now there really is nothing we can do to change that.
I guess you have to decide what you can and can't do, and do the best you can..............the feeling of helplessness is one that the power brokers like to engender in "the masses".............it comforts them...........but I suspect they are all paranoid as hell
IMHO at this point in time do what you can to take care of yourself and people you care about. As things play out over time there may be ways to come together in an organized fashion to change the system, but I don't think we are there yet. Maybe it's starting in California. I see protests starting there, we'll see how that plays out. But I think things are going to have to get a lot worse. Until then the politicians and media will keep the masses divided and fighting amongst themselves.
The way you wrote that is funny but there's a lot of truth in it.
Give up complacency, give up needless consuming, give up the "consumer" moniker conferred on us by the media, give up all the baseless assumptions about life, the ones fed you by the system.
Give up driving and start walking more. Give up processed food and McDonalds. Give up TV and commercial radio.
Give up all this mediocrity that passes for the content of life. Don't wait. Start today. Get outside that miserable box.
A very good article!
This needs to be done, but judging from Barney Franks' comments on TV last week or so, it ain't gonna happen.
I heard a slogan, I don't recall who said it, but it has always seemed apropos to the economic situation: NATIONALIZE THE FED! Such a move could, in principle, be very easily done by the executive, of course there would be holy hell to pay from the banks who effectively treat the Fed as their own private club. It seems real structural change will not come and cannot come until we are indeed in a Depression with the scope of the Great Depression of the thirties. The smart guys have prevented that from happening for now, but this whole thing has years to work itself out. Eat. drink & be merry!
I agree. There is going to have to be a DEVASTATING crash in this country before things change. Until then it will unfortunately be "Business as Usual".
The President and the Congress had better seriously re-think their position on restoring the Glass-Steagall Act.
Your decision will very probably determine whether or not you have a "next term!" We can do without any of you. You need us for re-election!!!!
AND WE ARE ANGRY!!!!!!!!!!!!!!
Restore Glass-Steagall. If ObamaCo can't do this, at least, then we'll finally know whose side they're on (as if we don't already). We'll have to throw them out at the first opportunity. The health bill is already a pretty good indicator of who they're working for.
It helps that some of the biggest banks themselves are calling for a repeal. Perhaps this is something our sold-out Congress and President can do.
The eventual downfall after decades of opposition by the FIRE sector of the Glass-Steagall Act, and the economic bubbling and collapse that followed, shows the futility of reform legislation in the face of opposition from the private sector. The public interest can hold the line for many years, but eventually a critical mass of lies will destroy that defense -- and the critical mass will be reached because the private interests have all the time in the world to martial their resistance.
Our only way out of this morass is to nationalize retail and residential mortgage banking; the first to protect the nation's currency (rendering the Fed irrelevant) and the second to prevent abuse of the public's residences to inflate bubbles. These measures, together with single-payer health care, would break the dictatorship of the FIRE sector over the rest of the economy, making investment more productive. (Noting that productivity of labor is an often-cited statistic, but productivity of investment is never cited since profits, wherever they come from, if even from bubbles, is the single desired "product."
How about restoring the Glass-Steagall Act and retracting the bailouts? Let those banks fail on their own. Breaking them up won't hold them back for long for they could always merge like bad boys.
Let's nationalize the Fed, for openers, and go for the entire finance industry next.
Making for-profit operations responsible for the common weal is by definition conflict of interest.
Simple and obvious move. Restore Glass-Steagall.
Joe
Yes, yes, yes! Restore Glass-Steagall -- Adam Smith would heartily approve -- and ... tax the hell out of those obscene (in the context of the irresponsible behavior and the damage done to the global economy) profits and bonuses.
The part about bringing back Glass-Steagall is good, but breaking up the banks will end up the way breaking up the giant US phone company did, with regional monopolies taking the place of a national monopoly and with the same lack of accountability. Trust busting has only really worked at all when regulation was a complement to it. Nationalization would really be the way to go along with keeping Glass Steagall, then the USA's people would own the banks they've already shelled out so much of their taxpayers' money for in the first place, and that would provide for real accountability so essential to a real democracy,
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