http://www.counterpunch.org/kaufman09192008.html
The Bi-Partisan Origins of the Financial Crisis Shattering the Glass-Steagall Act By William Kaufman CounterPunch: September 19, 2008 If you're looking for a major cause of the current banking meltdown, you need seek no farther than the 1999 repeal of the Glass-Steagall Act. The Glass-Steagall Act, passed in 1933, mandated the separation of commercial and investment banking in order to protect depositors from the hazards of risky investment and speculation. It worked fine for fifty years until the banking industry began lobbying for its repeal during the 1980s, the go-go years of Reaganesque market fundamentalism, an outlook embraced wholeheartedly by mainstream Democrats under the rubric "neoliberalism." The main cheerleader for the repeal was Phil Gramm, the fulsome reactionary who, until he recently shoved his foot even farther into his mouth than usual, was McCain's chief economic advisor. But wait . . . as usual, the Democrats were eager to pile on to this reversal of New Deal regulatory progressivism -- fully 38 of 45 Senate Democrats voted for the repeal (which passed 90-8), including some famous names commonly associated with "progressive" politics by the easily gulled: Dodd, Kennedy, Kerry, Reid, and Schumer. And, of course, there was the inevitable shout of "yea" from the ever-servile corporate factotum Joseph Biden, Barack Obama's idea of a tribune of "change"--if by change one means erasing any lingering obstacle to corporate domination of the polity. This disgraceful bow to the banking industry, eagerly signed into law by Bill Clinton in 1999, bears a major share of responsibility for the current banking crisis. Here's the complete roll call of shame: REPUBLICANS FOR (52): Abraham, Allard, Ashcroft, Bennett, Brownback, Bond, Bunning, Burns, Campbell, Chafee, Cochran, Collins, Coverdell, Craig, Crapo, DeWine, Domenici, Enzi, Frist, Gorton, Gramm (Tex.), Grams (Minn.), Grassley, Gregg, Hegel, Hatch, Helms, Hutchinson (Ark.), Hutchison (Tex.), Inhofe, Jeffords, Kyl, Lott, Lugar, Mack, McConnell, Murkowski, Nickles, Roberts, Roth, Santorum, Sessions, Smith (N.H.), Smith (Ore.), Snowe, Specter, Stevens, Thomas, Thompson, Thurmond, Voinovich and Warner. DEMOCRATS FOR (38): Akaka, Baucus, Bayh, Biden, Bingaman, Breaux, Byrd, Cleland, Conrad, Daschle, Dodd, Durbin, Edwards, Feinstein, Graham (Fla.), Hollings, Inouye, Johnson, Kennedy, Kerrey (Neb.), Kerry (Mass.), Kohl, Landrieu, Lautenberg, Leahy, Levin, Lieberman, Lincoln, Moynihan, Murray, Reed (R.L), Reid (Nev.), Robb, Rockefeller, Sarbanes, Schumer, Torricelli and Wyden. REPUBLICANS AGAINST(1): Shelby. DEMOCRATS AGAINST(7): Boxer, Bryan, Dorgan, Feingold, Harkin, Mikulski and Wellstone. NOT VOTING: 2 REPUBLICANS (2): Fitzgerald (voted present) and McCain. The House Democrats were no less enthusiastic in their endorsement of this invitation to plunder--the repeal passed there by a margin of 343-86, with the Donkey Party favoring the measure by a two-to-one margin, 138-69. Current House speaker Nancy Pelosi managed not to register a vote on this one, so great was her fear of offending her party's corporate paymasters even though she knew passage was a sure thing. According to Wikipedia, many economists "have criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis. The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the 'finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more t! han $200 million for lobbying in 1998,' according to the Center for Responsive Politics. 'These industries succeeded in their two decades long effort to repeal the act. ' " This lust for banking largesse is as wanton among Democrats as Republicans--right up to the current presidential campaign. According to the Phoenix Business Journal, Obama and McCain . . . have accepted a substantial amount of campaign money from Wall Street bankers, investment and securities firms and their executives during this election cycle. Investment firms have donated $9.9 million to Obama and $6.9 million to McCain this campaign thus far, according to the Center for Responsive Politics. Commercial banks have given Obama $2.1 million and McCain $1.9 million. Private equity firms and hedge funds have given Obama $2 million and McCain $1.4 million, according to CFRP. Lehman Brothers, Goldman Sachs, JP Morgan Chase & Co., UBS and heavyweight law firm DLA Piper are among Obama's top contributors. JP Morgan acquired Bear Stearns with the federal government taking on as much as $30 billion Bear assets as part of the deal. McCain's top donor sources include Merrill Lynch, Goldman Sachs, Citigroup and Blank Rome and Greenberg Traurig LLP law firms. So . . . the next time a mass-media-lulled Democrat ridicules Ralph Nader for arguing that there are few significant differences between the two major parties on the truly important issues, you might refer them to this atrocity, along with all the other ones. William Kaufman can be reached at [EMAIL PROTECTED] *** http://www.thenation.com/doc/20080929/editors Backward Bailout Editorial, The Nation Sept. 10, 2008 (This appears in the 9/29, 2008 edition of The Nation) George W. Bush may be a disappearing lame duck, but he is not through doing damage to the Republic. His half-baked rescue of Fannie Mae and Freddie Mac leaves another stink bomb on the Oval Office desk for the next President. Bush left the heavy lifting to Treasury Secretary Henry Paulson, a Wall Street guy who naturally fashioned a Wall Street-friendly deal: get the public's money but don't make any promises. In this case the taxpayers are on the hook for some $100 billion for each of the failing mortgage giants. The deal stinks because it doesn't really solve anything. Fannie and Freddie executives got sacked, but nothing substantial was changed in the weirdly illegitimate structure of these private, profit-making corporations sponsored by the federal government. Instead of acting decisively, the Treasury basically opened the public's wallet and promised to spend whatever it takes to keep the companies upright. "Conservatorship" is a fiction. The taxpayers own these two high-flying turkeys in all but name because they are now picking up the tab. A real solution to this mess is not complicated: wipe out the corporations and nationalize them, buy out the shareholders for pennies on the dollar and restore Fannie Mae to its original status as a federal housing agency (maybe merged with Freddie). Its functions involve vital public services--supporting the flow of mortgage financing, encouraging broader homeownership and subsidizing construction of low-income housing. These public goods do not much interest private financiers unless they can harvest rip-and-run profits, which is exactly what they did, with their usurious lending in the subprime mortgage scandal. Paulson and other Washington players are focused instead on "investor sentiment," that is, trying to halt the panicky flight of major creditors. If other nations join China in selling off their Fannie/Freddie portfolios, the credit crunch will become a deadly stranglehold. This is the reality of our debtor nation's dependence on supposed rivals, who are propping up America by lending to us. If they decide to stop, Uncle Sam is screwed. Instead of rescuing financial losers, the government ought to be devoting its heaviest resources to jump-starting the real economy. Instead of bailing out the money guys who caused this crisis, Washington should concentrate on bolstering enterprise, employment and productive investment. Washington has got it backward. The financial system will not get well and return to normal lending until the economy regains its natural vigor. Bankers' fright is sure to deepen as more firms fail; witness the tottering Lehman Brothers. Given the depth of this crisis, only the government has the ability to provide the needed stimulus, by spending money on real economic activity--programs that create new jobs and incomes, production and profit. Does Barack Obama or John McCain understand this? Neither candidate has acknowledged the enormity of what's facing the country or explained the dire implications with clarity and frankness, much less described plausible solutions. McCain is hopeless, mouthing right-wing bromides about corporate tax cuts and smaller government. Obama has said useful things about financial reforms and has supported some infrastructure funding, but he too has lacked the courage to tell the hard truth about the ditch the country is in and how to get us out. Obama's limited comments suggest he sees the crisis much the way Washington does. That won't be good enough if he becomes President--though a deepening crisis may force him to take bolder action. Whatever the two candidates claim to believe now, one of them is going to get walloped in January when he enters the Oval Office. ------------------------------------ --------------------------------------------------------------------------- LAAMN: Los Angeles Alternative Media Network --------------------------------------------------------------------------- Unsubscribe: <mailto:[EMAIL PROTECTED]> --------------------------------------------------------------------------- Subscribe: <mailto:[EMAIL PROTECTED]> --------------------------------------------------------------------------- Digest: <mailto:[EMAIL PROTECTED]> --------------------------------------------------------------------------- Help: <mailto:[EMAIL PROTECTED]> --------------------------------------------------------------------------- Post: <mailto:[EMAIL PROTECTED]> --------------------------------------------------------------------------- Archive1: <http://www.egroups.com/messages/laamn> --------------------------------------------------------------------------- Archive2: <http://www.mail-archive.com/[EMAIL PROTECTED]> --------------------------------------------------------------------------- Yahoo! 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