I can already hear the sloshing sounds of money.
An amazing thing happened at the Republican Convention when some unexpected language showed up in the official 66-page Republican Platform 2016, a document that a delegate from Texas enthusiastically called, “the most conservative platform in modern history.”
And therein is this sentence:
We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.
It’s followed by this bit of wisdom: “Sensible regulations can be compatible with a vibrant economy….” By extension, reinstating the Glass-Steagall Act would be that “sensible regulation.”
Upon hearing about this, Wall Street executives and just about everyone else at JPMorgan, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and a slew of others, plus central bankers in the US and abroad, especially those that cut their teeth at Goldman Sachs, plus Treasury officials and revolving-door beneficiaries, they all ran to their respective johns and vomited.
Reinstating the Glass-Steagall Act would mean separating federally insured deposit-taking banks from everything else and limiting their activities to classic banking. Once implemented, it would bring about a form of financial sanity and decades of financial stability among banks. Hedge funds like Goldman Sachs would presumably be allowed to collapse under their risks and go bankrupt without bailout, handing juicy losses to stockholders, bondholders, counterparties, and others, including possibly even executive pension plans.
This was a lesson learned during the Great Depression. Separating those risks from banks, and keeping banks smallish, worked for decades until a Republican Congress and President Clinton conspired to abolish the act. It took banks only eight years of gorging on risks and merging with hedge funds and cheating and running wild and thinking they were gods, before the financial system began to crack in 2007.
Nothing was learned from the Financial Crisis. Risks are now much bigger than ever before, and more concentrated, and banks are now officially too big to fail and too big to jail, and everyone knows it.
But if Republicans are for reinstating the Glass Steagall Act, why hasn’t it happened yet? They’ve run Congress for years, and not even as much as a distant rumble has come forth about reinstating Glass-Steagall.
Besides, they’re not the only ones.
Turns out, on June 25, similar language showed up in the draft of the Democratic Platform, under the evil heading “Wall Street Reform,” and it reappeared in the July 1 version of the draft in slightly watered-down form (emphasis added):
Democrats will not hesitate to use and expand existing authorities as well as empower regulators to downsize or break apart financial institutions when necessary to protect the public and safeguard financial stability, including new authorities to go after risky shadow-banking activities. Banks should not be able to gamble with taxpayers’ deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernized version of Glass-Steagall and breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.
This was Bernie’s doing. He pushed Hillary Clinton into what must be for her – who’s made a fortune off Wall Street – a very unsavory direction. Now it’s in the Democratic platform, to be adopted at the convention in Philadelphia next week.
This official bipartisan hostility toward the biggest risk takers on Wall Street is a sign of just how aggrieved Americans have become with this endlessly powerful financial construct that keeps bleeding those very Americans. But so far, Congress has been all too eager to please and aggrandize this construct at every twist and turn.
Congress still doesn’t have to act on these platforms, and neither candidate has to even pay lip service to them, but now it’s in black-and-white for all to see, and it’s picking up momentum.
What has changed? There’s an election coming up. And that means money. The problem is, Wall Street has been stingy.
So both parties suddenly agree: Wall Street has to be dealt with harshly. Or rather, our politicians are pulling out all stops to extract maximum campaign contributions from Wall Street and its employees and power brokers, because in the end politics is all about money, and now that Wall Street is seriously scared, they’re going to pull out their wallet after they’re done vomiting and pay dearly to make this mess go away.
And Congress will get no closer to reinstating Glass-Steagall and crack down on the financial construct of Wall Street than it is cracking down on the worst abuses of another sector, a sector that too is booming, and it too is a costly boom. Read… This is What’s Cannibalizing the US Economy
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” Hedge funds like Goldman Sachs would presumably be allowed to collapse under their risks and go bankrupt without bailout, handing juicy losses to stockholders, bondholders, counterparties, and others, including possibly even executive pension plans.”
Didn’t stop Greenspan from bailing out LTCM.
Given the enormous sums of credit being dumped into the banking system by the Federal Reserve for it’s “stimulus” I have to question how effective Glass-Stiegall would have been. As long as the Fed keeps creating credit bubbles, we’re going to keep having major banking crises.
The Fed and Greenspan did not bail out LTCM.
It was LTCM (Long Term Capital Management) derivative exposure, which was tiny compared to what is loose in the market today, that caused it to crash. The other big banks on Wall street that were counter parties to these derivatives, were the ones who bailed out LTCM.
1998 Wall street banks bail out LTCM
2008 The Fed bails out Wall street banks
2011 The Treasury bails out the Fed via QE
Next ??? Who bails out the Treasury? The IMF?
The Federal Reserve orchestrated the bailout, while the other banks did recognize that LTCM’s failure posed a threat they never trusted each other enough to actually do it had it not been for the Fed’s meddling. Had LTCM been allowed to fail, had there not been yet another Greenspan Put to cause the dot com bubble, the party on Wall Street would have ended then and there. There would have been no serial bubbles, no great recession/depression, none of that. But no, the government couldn’t allow the market to run its course.
Plus the FED graciously followed the orchestrated “bailout” by the private sector with three successive cuts in the Fed Funds rate which fed the speculative frenzy. The NASDAQ took off and doubled in value after the Fed provided the extra liquidity to the banking system. The Gramm, Leach Bliley Bill removed restrictions on banking/shadow banking activities.
We can only hope.
yes, only hope. please do not ‘expect’ as it aint gonna happen…
Wonderful analysis, Wolf. Just one quibble: “Nothing was learned from the Financial Crisis.” I have to disagree. They learned the lesson well, that rewards are private and the risks public, ie, they have nothing to fear from blowing up the financial system.
The one lesson that should have been learned from the Financial Crisis is that central bank bubbles are bad. This lesson certainly wasn’t learned at all.
POLITICKING:
A proposed activity or promise undertaken for political reasons, as campaigning for votes before an election.
It would be too good to be true. It will never happen. The “Deep State” is too deeply entrenched in the Wall Street/Washington connection.
The amount of money involved is too huge, to allow this to occur. So therefore it won’t. Big money gets what big money wants.
@Out, the deep state IS the wall street/washington connection. Wall street lawyers invented the spy agencies. But, you probably knew that. ;-)
The LaRouchePac people will be overjoyed as will hundreds of millions around the world Time to sell my Hamptons McMansion evidently Now can we work on getting the real truth about who did 911 and get rid of the FED please That would complete the job
‘This was Bernie’s doing. He pushed Hillary Clinton into what must be for her – who’s made a fortune off Wall Street – a very unsavory direction.’
Bernie is a fool if he thinks Hillary would follow through on this, it was hubby who abolished it in the first place and Hillary is supported by every Financial institution of any size in America, all of which do not want Glass-Steagall back again.
Did Bernie sell his soul for nothing?
It won’t happen unless you put a referendum. Even they repeal it, the laws are for common people, not the elites. Comey and Leech show it all.
Wall Street banks throw enough money at those holding office in Congress that reinstating the Glass Steagall Act is a pipe dream.
That’s true enough, but tobacco lobbyists threw all the money in the world about at one time, and Congress still managed to ban TV cigarette advertising. The message has to be driven home effectively: “Glass-Steagall” by itself is Greek to most people.
Regarding platforms, they are meaningless. In 1932, FDR ran on a platform which contained a plank swearing fealty to the gold standard. In April, 1933, he confiscated every American’s gold, replacing it with paper money. (but the gold standard was, technically, retained: everyone except Americans could still exchange their dollars for gold (!). This is the kind of sadistic sophists we are dealing with.
Well stated Robert. FDR did warn the elites that he was going to confiscate gold from the masses, and those ‘in the know’ moved their gold to safety (Switzerland)
FDR and Teddy came from Dutch banking stock. In 1784, Isaac Roosevelt and Alexander Hamilton founded the Bank of New York, and in 1792, it was the first corporate stock traded on the NYSE.
Hamilton, the guiding hand in the formation of central banking in the U.S., whose head was quite recently on the chopping block for replacement on the $10 bill by Harriet Tubman,in part because he had been all but forgotten by this time, was improbably resurrected (and at the expense of Andrew Jackson, yet, who was the hero in the battle to “End the Fed” of his day) due to to brilliance of Lin-Manuel Miranda in portraying his as a man of the people in the Broadway play Hamilton. He was anything but: having been part of a syndicate buying up near-worthless Revolutionary Continental debt for pennies on the dollar, in return for his influence in getting D.C. made the national capital was able to have law introduced making this debt payable 100%- in gold.
Regarding elites being tipped off, it might have been obvious to all when Britain abruptly abandoned the gold standard in 1931 (see esp. Louis Sullivan’s Prelude to Panic (1936). But in the biography Lindberg, very interestingly, he was told by the FBI to pay a March 1932 ransom demand in the form of dollars which were gold certificates, specifically because, he was told, the U.S. would be probably going off the gold standard. Possession of these helped convict Bruno Hauptman.
How often have both party’s talked the talk but never walked the walk in an election year.
Its to sane and needed for it to actually happen. IMHO.
Everyone has to understand that there is a direct relationship between the $15 minimum wage and the reinstatement of Glass -Steagall in the Democratic platform.
Once Glass Steagall is reinstated many high paying but absolutely useless jobs will be eliminated.Those affected will have to find other sources of income.Most have no skills outside of pushing around paper or screwing customers,so they will be forced to take minimum wage jobs.The Democrats are just trying to attract this group by raising their wages in their new jobs.
Wouldn’t that be precious having a squid alumnus mixing up your next carmel macchiato? I might even leave a tip or NOT
Create huge fear of depression and crash the markets so you may justify giving criminal enterprises infinite access to taxpayer wealth so they may buy up valuable (many being priceless) assets for pennies on the dollar to sell them back later, at huge profit.
Rinse and repeat (only periodically so as not to raise suspicion, approximately once per generation).
Chicken, from the SECrant?
And the US national debt is going to be paid back, too.
There are some pretty funny comments this morning.
I sure hope they reinstate the Act.
The question I have is whether or not to believe in the possibility of a massive hidden security system to keep the status. (No, I am not wearing tin foil this morning). Money. There is simply so much money and power at stake. It is easy to imagine private security agencies, owned and operated by the squid, investigating and smearing blackmail dirt around to keep the game going.
Maybe, they even hire speechwriters? :-) (Or at least pay them under the table).
Wall Street hires many consultants to push the agenda they want pushed. In NYC it was common to have many college professor PHD types on the Wall St. payroll. The global warming/climate change/carbon tax agenda is a creature of this system. That way they can claim many experts support an issue while failing to disclose they pay them to produce the policy.
There are also security companies that cater to the Wall St. crowd. They hire these people to dig up dirt or entrap anybody they fear. The firm I worked for was infamous for giving ex NY politicians no show jobs. That is another way they manage the system.
Hoping for Glass Steagall to be reinstated is like hoping Donald Trump will live to serve as president. ‘Snowball in Hell’ folks. And yet one can dream!
Glass Steagell was a great regulation for its time but now I am not so sure it would change much. Better than Glass Steagall would be total transparency of the derivatives market. If they could see the totality of the risk they would all be afraid, which is why they don’t want to disclose it.
I worked in a traditional Wall St. firm that didn’t take deposits. That didn’t keep them from destroying the market and imploding. Transparency might have provided a warning everybody could see.
I would also break up the banks. Any bank with more than 5% of the market is probably a systemic problem.
I agree with everything you say, but I would imagine the powerful banks could only be broken up when they are already in pieces. They will have to crash the system first, (self-inflicted), and then a lobby in place to save the pieces worth saving. However, if Wall Street is still running the show, we know what pieces will be on the save list, don’t we?
Remember “I will filibuster telecom immunity.” Then the telecoms went on to finance the lion’s share of the Dem convention. You’re right. It’s a shakedown plain and simple. Neither party will reign in the banks because both are incredibly corrupt.
I go with your suggestion that the Republican platform is floating a threat couched in a promise. Wall Street better hold its nose and start supporting Trump or the gravy train stops.
As you point out, not once in the past four years has the Tea Party dominated Congress even hinted at reinstating Glass-Steagell. Now suddenly a drop of sanity? In a party platform that otherwise IS the most reactionary in decades?
The fact that they put the reintroduction of Glass Steagall into the platform is a clue that it really isn’t that important anymore. They may actually do it to take our eyes off the really important problems, derivatives, and the pile of non preforming loans still out there that will never be paid off.
Abolish the Feral Reserve System, reinstate Glass-Steagall, break up every too big to fail gangster bank AND prosecute everyone if them them for their rampant criminality including subverting the US Department of Justice following the Great Financial Crisis in order to protect them from prosecution.
Could you include Jon “the slime” Corzine in that prosecution please ? The MF Global Madoff or will Obama pardon him before leaving office?
No pardon necessary. It’s called statute of limitations.
Glass-Steagall will be reïnstalled.
Forget politicians.
Either the banking system will collapse under its own weight or preferably public opinion will reach the level of awareness needed to take down the polical-financial complex.
An ever growing minority in North Western Europe with the aid of blogs like these (and many others) is dedicated to make this information accessible for all citizens/paycheck slaves/voters.
Unlike a few of the commentors above, I am pretty optimistic this will happen.
No timetable.
This is like that old question i.e. are voters stupid? Well my answer to that is that we won’t be in this dire situation if they aren’t :)
You can’t rely on muppets to do the right thing. And anyone thinking that there will be some peaceful resolution is delusional.
There is no politics so long as the Federal Reserve can administer their heroin. They have to go. Hillary’s paid off and won’t even try.
” … banks are now officially too big to fail and too big to jail, and everyone knows it.”
re: too big to fail, certainly true and the only reason needed to pare them down to size.
re: too big to jail, SEZ WHO? Certainly not you, Mr. Richter, nor anyone else reading and commenting in this fine blog.
Without trying to hijack this thread into politics – all issues are political in the end, and all politics are local (talk to and convince your neighbors) – maybe the election of Johnson/Stein could bring about this essential change for our cumulative well-being. I think it goes without saying that neither the democrat nor republican candidates will undertake this necessary step, regardless of the stated platform aims.
I voted for Johnson last time as a dissenting voter. This time he is actively supporting TPP. I would never vote for a supporter of NAFTA on steroids. I would like to point out that the third party vote in the last presidential election, in Florida, was 2.5% which is the margin by which Romney lost. So it wasn’t a wasted vote as many told me.
It’s Trump for me this time.
where’s howard beale when we need him?
ah, things aren’t that bad, it’s a ploy to power.
on the other hand, where’s arthur jensen when we need him?
The republican congress has not addressed Glass Steagall for the last couple of years is the same reason they have done nothing to stop the demorats and the NWO. They have no huevos. They were neutered by the ESTABLISHMENT RINO’s. The GS 1933 bill protected the population from the money grabbers and kept them in order for decades until the demorats repealed it under B Clinton.
All too little, too late. We literally could be days away from a monumental top in a variety of assets. Glass-Steagall, even if enacted a year ago would not stop the avalanche that is coming. Just hope we are safe. The top employees of the big banks should be prosecuted and do jail time. Politicians should be thoroughly investigated and do jail time. The lobby industry should be utterly gutted. Campaign donations should be capped at $10 a human being; $0 for corporations. Abuse of corporate law / limited liability / foreign shells should be stopped. Our constitution should be rewritten for a modern era: lifetime supreme court judges? pure idiocy… no annual physical for the pres with a removal if cognitive problems? pure idiocy… states with tiny populations holding the big population states by the “*alls”? disgraceful abuse and certainly not democracy.
Okay… I know we all have a greater chance of defecating gold and platinum ingots relative to ANY single one of those rants EVER being addressed.
Trump is the great unknown. His campaign is predicated upon white identity politics. Ugly as that may be, it combines nativism with populism. It is inherently polarizing. It creates an us versus them division. Trump, as a demagogue, must go after high value targets to garner public support.
Wall Street is on the wrong side of the bipolar equation. Trump reminds me of an American recasting of Otto von Bismarck, the “Blood and Iron”, Iron Chancellor of Germany. It was Bismarck, the Prussian Autocrat and mortal enemy of liberals and socialists, who first introduced into Europe social security, universal healthcare and unemployment compensation. Look it up!
Trump may be perfectly prepared to slaughter the fat cats on Wall Street to shore up his political base. Obama came into office threatening Wall Street: “I am all that stands between you and the pitchfork”, he told a meeting of bankers at the White House. His fear of the magnitude of the 2008 financial crisis as he became increasingly aware of its severity caused him to surrender to Wall Street. Hillary was bought and sold a long time ago. But Donald? Stay tuned.
Trump is NOT Bismark.
Bismark was a Militarist.
Trump is a Populist and much closer to the Ideology that became the NASDP.
Read the Early tactics of the NASDP and the italian Fascist then look at what trump is doing.
Populist, Racist, Oppressive.
That’s who and what trump is.
American’s cant or wont see it.
Thanks for your comment. I do not see the connection to Italian or German Fascism although I have heard others make the same comparison. I do not see Trump burning down the Capitol or forming economic syndicates in lieu of capitalism.
LOOK at their methodology.
What became the NASDP in its various incarnations 1919 1933,
And the rise of fascism in Spain and Italy.
Trump is using their methodology’s just as Ergodan is. Ergodan is not a Fascist. He is a Megalomaniac Muslim dictator in the making, not much milder than Saddam was.
Trump is a populist, who could become a populist demagogue, and do America a huge amount of damage, nationally, and internationally.
He makes a great amount of populist noise, most of which, he has no idea how to apply, that can not be applied in the current American democratic nation, or sphere of influence.
His NATO, trade, finance, and immigration policy’s, along with most of his other stated objectives, sound great, are great when applied at a company/business level.
But completely impractical, at a nation on nation, global political level.
I was Against O bummer. As he was clearly a bad deal for the world and America. I am against Trump for the same reason which leaves.
Granny Clinton.
It is sad, that currently she is the best America has to offer, when it need’s much better.
Another Truman would be the minimum requirement. He was almost laughed out of office. 40 years later he has proven very astute, and his doctrine was followed until at least 1991 and still is applicable today.
It’s the NSDAP: Nationalsozialistische Deutsche Arbeiterpartei
National Socialist German Workers Party
As the name suggests the party’s platform was what we would call the far left. It was, however, to the right of the Communists.
The NSDAP for example did not want to abolish private property. This is the reason Hitler managed to get secret funding from industry- it was taking (it thought) the lesser of two evils.
But the whole ideological bit was just window dressing for Hitler, who had no time for right/left metaphysics. He made this clear at the first meeting with industry, who bluntly asked why they should fund his party of the left.
He was finally challenged in an open meeting by the Brown faction within the NSDAP (essentially communists but German, not Comintern or Communist International which was Moscow controlled)
This is where the simmering personality cult crystallized- Hitler simply dismissed the debate as irrelevant. He captured the party- in effect announcing that he was the party.
(Coincidentally or not a similar step was taken by Lenin who ordered factions within the Communist Party to dissolve- basically making the party Bolshevik- hard left)
The key word in the Nazi name is ‘nationalist’ and the driving force in Hitler was to avenge Germany’s defeat in WWI, in which he fought and was gassed. A main slogan was that the party would ‘tear up the Treaty of Versailles.’
This included regaining the territory lost in WWI.
A pre-war globe will show part of northern Germany cut off- still German but not attached. It was cut off by territory lost to Poland. It was the failure of demands by Germany to reconnect with this cut off portion that led to the invasion of Poland on Sept. 1, 1939, and the British Declaration of war on Sept.3
A related party plank was the assertion that a secret cabal of financiers (mostly Jewish) controlled the world and created wars for profit.
We are familiar with this idea, which is alive and if not well, active.