Forum Post: Clearing the Fog of Class War ~ So We can Fight Back

In this Class War waged by the 1% and fought by their RepubliCon Cult against We The (mostly unaware 99%) People, facts and history get distorted by a smokescreen of propaganda. Some are saying our economic woes began in 2008, when we duly elected the first Black POTUS, Barack Obama. And they point to the debilitating and shameless GOP sabotage, blackmail and hostage taking as proof that Obama and Dems are the real cause of our tortured lack of progress.

We have to fight back in this class war, but we can't fight when some of us have closed or deceived eyes!

Pinning the smoldering threat of the Greatest Bank Robbery in world history (Wall Street Heist and World Economy Debacle) to 2008, is like pinning the growing threat of WW-2 to Germany's invasion and Occupation of France. It's mind bogglingly wrong!

It was begun in 1979, with the deregulation, pro-business, anti-middle class and anti-labor onslaught (Blitzkrieg) by Margret Thatcher and '80 Ronnie Raygun; the denial of the need for and subsequent erosion of Post Depression Safeguards, the implementation of Shock Doctrine (Class Warfare) and the eventual repeal of Glass Steagall that led to the Unbridle GREED (in fact Greed is Good) and the Bankster's Inside Job. Now, having been bailed out and protected by 8 years of Bush (pickup where Raygun left off) GOP decriminalizing (get out of Jail Free) laws and deregulation, they are still at it (redistributing our wealth to the top 1%) with impunity and threatening to cause another, possibly bigger, economic Fukushima!

We need to re-institute Glass-Steagall, kill Citizens United and return key provisions of the Voters Right Act!

Support the 21st Century Glass Steagall Act

http://my.elizabethwarren.com/page/s/glass-steagall

Looking Back at the Repeal of Glass-Steagall, or, How the Banks Caught Casino Fever

If you’ve been reading ND20, you know that the repeal of the Glass-Steagall Act has been a key issue in both understanding the causes of the financial crisis and thinking about how to move forward. Glass-Steagall Act was introduced during the Great Depression, and was repealed in 1999, paving the way for banks to invest in nasty things like mortgage-backed securities and collateralized debt obligations.

As part of our ‘New Agenda for America’ series on the 80th anniversary of the Great Crash, TARP watchdog Elizabeth Warren weighed in on how President Roosevelt and the New Dealers brought innovative ideas to prevent another economic disaster, including Glass-Steagall, which separated banking from high-risk financial speculation (see “The Great Lesson”). Way back in the spring, Rob Johnson, Director of Financial Reform at the Roosevelt Institute, appeared on Al Jazeera to talk about the disastrous impact of doing away with the Glass-Steagall Act (Braintruster Rob Johnson Talks Bailouts to Fault Lines). More recently, Roosevelt Institute Braintruster Bruce Judson argued on this blog that we need an updated “Glass-Steagall 2.0″ that categorizes financial institutions and restricts their activities according (see Glass-Steagall 2.0: The American People Deserve An Explanation).

As our colleagues at Common Dreams point out, today is the 10-year anniversary of Glass-Steagall’s repeal. Robert Weissman writes: “It is an anniversary worth noting for what it teaches us about forestalling financial crises, the consequences of maniacal deregulation, and the out-of-control political power of the megafinancial institutions.”

Weissman notes that Glass-Steagall remained law until 1998, when Citicorp and Travelers Group announced they were merging:

Such a combination of banking and insurance companies was illegal under the Bank Holding Company Act, but was excused due to a loophole that provided a two-year review period of proposed mergers. The merger was premised on the expectation that Glass-Steagall would be repealed. Citigroup’s co-chairs Sandy Weill and John Reed led a swarm of industry executives and lobbyists who trammeled the halls of Congress to make sure a deal was cut. But as the deal-making on the bill moved into its final phase in Fall 1999, fears ran high that the entire exercise would collapse. (Reed now says repeal of Glass-Steagall was a mistake.)

The result? Casino fever took over commercial banking industry. Weissman quotes Roosevelt Institute Braintruster and Nobel Prize-winner Joseph Stiglitz: CONTINUED: http://www.rooseveltinstitute.org/new-roosevelt/looking-back-repeal-glass-steagall-or-how-banks-caught-casino-fever

Reflections on Glass-Steagall and Maniacal Deregulation

Published on Thursday, November 12, 2009 by CommonDreams.org by Robert Weissman

Today marks the 10-year anniversary of the passage of the repeal of the 1933 Glass-Steagall Act and related legislation. It is an anniversary worth noting for what it teaches us about forestalling financial crises, the consequences of maniacal deregulation, and the out-of-control political power of the megafinancial institutions.

The repeal of Glass-Steagall removed the legal prohibition on combinations between commercial banks on the one hand, and investment banks and other financial services companies on the other. Glass-Steagall's strict rules originated in the U.S. government's response to the Depression and reflected the learned experience of the severe dangers to consumers and the overall financial system of permitting giant financial institutions to combine commercial banking with other financial operations.

Glass-Steagall protected depositors and prevented the banking system from taking on too much risk by defining industry structure: Commercial banks could not maintain investment banking or insurance affiliates (nor affiliates in non-financial commercial activity).

As banks eyed the higher profits in higher risk activity, however, they began in the 1970s to breach the regulatory walls between commercial banking and other financial services. Starting in the 1980s, responding to a steady drumbeat of requests, regulators began to weaken the strict prohibition on cross-ownership.

Despite herculean efforts by Wall Street throughout the 1990s, Glass-Steagall remained law because of intra-industry and intra-regulatory agency disagreements.

Then, in 1998, in an act of corporate civil disobedience, Citicorp and Travelers Group announced they were merging. Such a combination of banking and insurance companies was illegal under the Bank Holding Company Act, but was excused due to a loophole that provided a two-year review period of proposed mergers. The merger was premised on the expectation that Glass-Steagall would be repealed. Citigroup's co-chairs Sandy Weill and John Reed led a swarm of industry executives and lobbyists who trammeled the halls of Congress to make sure a deal was cut. But as the deal-making on the bill moved into its final phase in Fall 1999, fears ran high that the entire exercise would collapse. (Reed now says repeal of Glass-Steagall was a mistake.)

Robert Rubin stepped into the breach. Having recently stepped aside as Treasury Secretary, Rubin was at the time negotiating the terms of his next job as an executive without portfolio at Citigroup. But this was not public knowledge at the time. Deploying the credibility built up as part of what the media had labeled "The Committee to Save the World" (Rubin, Fed Chair Alan Greenspan and then-Deputy Treasury Secretary Lawrence Summers, so named for their interventions in addressing the Asian financial crisis in 1997), Rubin helped broker the final deal.

The Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act of 1999, formally repealed Glass-Steagall. Among a long list of deregulatory moves large and small over the last two decades, Gramm-Leach-Bliley was the signal piece of financial deregulation.

What lessons should be learned from the 10-year debacle?

First, Glass-Steagall's key insight was in the need to treat regulation from an industry structure point of view. More:

Second, we need to return to Glass-Steagall's more particular understanding: depository institutions backed by federal insurance protection cannot be involved in the risky, speculative betting of the investment banking world. (Notably, the Glass-Steagall problem is now worse than it was before the financial crisis, following JP Morgan's acquisition of Bear Stearns, and Bank of America's takeover of Merrill Lynch.) More:

Third, giant financial institutions exercise too much political power, and for that reason alone must be broken up.

Fourth, we need broad reform in the area of money and politics. We need public financing of Congressional regulations, even stronger lobbyist reforms, and tight restrictions to close the revolving door through which individuals spin as they travel between positions in government and industry.

CONTINUED: http://www.commondreams.org/view/2009/11/12-8