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After 14 Years of Free-for-All, Glass-Steagall Is Back

26 | By Shah Gilani

Three cheers for Elizabeth Warren!

Yesterday she launched a wire-guided Scud missile at the too-big-to-fail banks.

The freshman senator from Massachusetts, formerly a Harvard Law School professor specializing in bankruptcy law, introduced her “21st Century Glass-Steagall Act” co-sponsored with Sens. John McCain (R-Ariz.), Maria Cantwell (D-Wash.), and Angus King (I-Maine).

And it’s got the Big Banks shaking in their boots.

Here’s why.

The 21st Century Act would separate institutions with savings and checking accounts, in other words FDIC-insured depository commercial banks, from investment and trading “banks” engaged in capital markets activities, most of which are on the border between speculation and manipulation.

Finally!

The senators noted that, “Under Glass-Steagall, major investment banks such as Drexel Burnham and Salomon Brothers failed without creating serious contagion in the broader economy. But in the post-Glass-Steagall world of the 2008 crisis, the failure of investment banks like Bear Stearns and Lehman threatened the entire economy.”

That’s right on the money!

Unless, of course, you don’t get the connection.

Then you might say something like, “It’s easy to say that if the investment banks are torn away from commercial banking and deposit gathering that the government can simply ‘let them all fail’ during a time of crisis. But if there is a financial meltdown like we saw in 2008, and one or two investment banks go down, with all of their counterparties, including commercial banks, suffering as a result, it’s a fair bet that the government will be back in the bailout business.”

Yeah, that’s what you’d say if you just don’t get it. That’s what Philip van Doorn at TheStreet.com said this morning.

Seriously Phil?

Here’s what you don’t get.

You used the word “counterparties,” Phil. There’s the connection. You see, Bear and Lehman threatened the entire system, even though they weren’t FDIC-insured depository institutions precisely because their counterparties were FDIC-insured depository institutions. Do you get it now? All the TBTF FDIC-backstopped (that means taxpayers are the drain-plugging tools) banks were doing exactly what Bear and Lehman were doing. That’s how they got to be counterparties. If there was separation, they wouldn’t be counterparties to troubled speculators because they wouldn’t jacked-up speculators. I almost want to say… you cementhead!

Or, if you’re a shill for crony capitalism on steroids, you might say something like, “Setting the Record Straight: Glass-Steagall Would Not Have Prevented 2008 Crisis.”

Yep, that came out of an email yesterday from Hamilton Place Strategies, a crony club that advocates on behalf of banks.

Hey cementheads, get your heads out of your cement mixer. See the above note to Phil.

The only problem with trying to make banking “21st-century safe” is that we live in the new old age of robber barons, and they are the bankers and politicians they’ve bought.

So, the chance of this bill going anywhere lies precisely between slim and NONE.

Unless…

Shah

P.S. Less than 24 hours ago, I released my biggest, boldest prediction ever. Check it out here.

26 Responses to After 14 Years of Free-for-All, Glass-Steagall Is Back

  1. Skipper says:

    Heaven forbid that banks would have limits and controls placed on them once again. Why the audacity of the Honorable Senator Warren! What is she expecting to accomplish? Protection of the citizenry, middle class, elimination of the TBTF Bank oligopoly, requiring banks holding savings of the people to act in a conservative manner once again, what was this senator and her cosponsors thinking? How could such a bill come out of Washington?

    Maybe there is hope, maybe there is a spark of sanity! We can only pray or are we not allowed to do that now either.

  2. Rc says:

    The bankers are a criminal entity. They need to be removed from wall street period. no more bailouts !!! go through the system like everyone else. Once the banks are removed the markets will be free again and they will control the government and not the other way around.

    • Ron says:

      I agree. It’s as simple as that; they are not honest brokers, and they have been living well because they don’t have to play by the rules. Collaboration and insider trading make it possible for them to skin us all with little threat of retaliation. from regulators.
      In China they would be hung, and I would not shed a tear.

    • Sailor Jo says:

      My father called the banks legalised street robbers. But besides those banks there is a shadow banking system that needs to be evaluated. Just look at the many billionaires, private equity firms, and so on.
      But let’s also look in the mirror. If we were not so greedy and more content with what we have (and not listen to the snake oil vendors), we would not support all those “entrepreneurs”.

  3. Barry says:

    The Canadian Banks fared well through the last failure. The reason they did not fail is due to Bank regulation and control of leverage. That is not rocket Science.Crony Capitalism is probably the only reason that there are no Banksters in Jail for fraud from the last fiasco.The grandchildren and on of American tax payers will be paying for that last crime even though the banks that were bailed out evicted the very people who have to pay for their greed for generations. This has to stop and Investment banks need to be separated from the taxpayers purse. Hurray for Elizabeth Warren!!You go Girl and take no prisoners!

    • rocco tamburrro says:

      Thank heaven for Senator Warren et alii:

      She and her cohorts are promoting legislation which promotes some preservation of the elderly and their assets.
      Until the investment banks, their supporting lobbyists and politicians eliminated Glasse-Stegall in 1999, the latter could aspire to some degree of dignity in their latter years with reasonable investment returns on their fixed income investments.
      A little greed and hypocrisy is inevitable in a capitalistic society, but the wall street crowd and their cronies have unbalanced our culture with the shift of 10% of total wealth from a majority middle class to a small minority of the super wealthy who already had 30% of the wealth, during the last 10-15 years.

      A good portion of this transformation occurred because the elderly were compelled to shift their safe investment funds into riskier entities in order to try to get better life sustaining returns. In most instances there were no benefits for the elderly and their standard of living was diminished to a major degree.
      Come on folks how many R/R’s and Lear jets does the average
      robber baron need to exist.!!!

  4. Edouard d'Orange says:

    Funny how this lying sack of she-cat s**t can propose any good legislation. Remember the cameraman assault, how she supports the President’s positions on the government built the economy (not the private sector), claim about being the only nursing mother to pass the bar exam, academic misconduct, claims about grandmother traveling across the country in a covered wagon, plagiarized recipes and last, but not least, american native heritage claims. The last claim could be laughed at, except that she used the claim to her advantage: In early 2012, the Boston Herald reported that Mrs Warren listed herself as a minority in a law school directory for nine years between 1986 and 1995. Harvard Law School has also touted Warren as a minority hire.

  5. Casey Koehler says:

    God bless Elizabeth Warren……maybe hopeless but at least someone is TRYING!
    How can she be helped by us?
    Casey Koehler

    • SANDYB says:

      Please contact your representatives & senators, or alternately sign the petition. I imagine we will get emails with the link or go to Elizabeth Warren’s website. Maybe she is considered a minority in Harvard strictly on gender status. Ever thought of that? I’m sure with John McCain the republicans can do the same on his site.

  6. Casey Koehler says:

    Maybe she is all those things…bag of she-cat sh…. but she
    had the best singular proposal for the American economy of
    any of those total dunces in D.C. Never thought I’d say that about a generally lying Dem.
    Casey Koehler

  7. JH says:

    Finally someone(s) with an understanding of the problem(s) & the courage to propose a solution. Shah, how do we get a “support petition” going & submitted to everyone in Washington?

  8. H. Craig Bradley says:

    POLITICAL REALITY

    This President is nowhere to be seen. Obama is in hiding this Summer, hoping the various scandals he caused will soon go-away. Evidently, he assumes the memory of the public is equivalent to that of a goldfish, about 3 seconds!

    About the only way the proposed reinstatement of Glass-Steagall would pass is with strong Presidential leadership. The Presidency no longer is capable of any leadership, much less strong leadership on a single policy or legislative issue. Besides, the U.S. BANKERS own President Obama anyway. He is all theirs!

    Remember too, Congress is only reactive, no propolactics. It took the stock market crash of 1929 and the Great Depression to get Congress to act last time around. Somehow, I don’t think much has changed since 1933 as far as our government’s personality is concerned. People don’t change and institutions made up of the same types of people don’t change their culture one bit, not in 100 years, nor in 1,000 years for that matter.

  9. Rich says:

    Notice that they, and the SEC, are totally ignoring The Volker Rule that is supposed to be implemented on January 1, 2014. The SEC was supposed to send notices to the prop trading banks as to the implementation of the Volker Rule. The Volker Rule is the recent version of Glass Steagle, is the law, and will never be implemented by SEC and Eric Holder.

  10. cory bell says:

    considering who is sponsering it one should approch it very carefully, like an IED. it could be ok,do not think so. sounds to good to be true. remember obama care. same type of pols. wrote it.

  11. duke says:

    Didn’t John McStain vote to repeal Glass-Steagall late90’s? What, he got religion all of a sudden? WOW

  12. Malcolm Rose says:

    Debasement of the currency, holding down the value of the USD against competitors’ currencies, was a necessity to make exports competitive. Deficit reduction measures have the opposite effect through a variety of mechanisms, There is a very large quantity of capital looking for investment vehicles. USD need USD-denominated investments. Reduction of the pool of US-Government bonds available makes intuitive thinking that this capital should flow to wealth-creating opportunities, but these opportunities do not arise from thin air, even with near-zero interest rates, and capital opens up more and more risky investments. Only banks create wealth from thin air. So the ineluctible rise of non-performing loans held, hidden, on the books as long as possible.

  13. Peter King says:

    Why didn’t you name JPMorgan as the major Gold buyer?
    Why not name them as the most crooked bank of the modern era?
    Why not call their bluff and tell the world they are manipulating commodity markets, especially the silver market, with deadly precision and with maximum grief to investors.?
    Why not denounce the so called regulators , like the CFTC, as a bunch of criminals colluding with JPM?
    Can the world really dance a jig to the manipulating tune of the greatest criminal empire of all time – JPMorgan?

    .
    .
    .
    .
    The answer is apparently…………………………….. YES

  14. Rick Mondale says:

    Congressman Bob Goodlatte, I am sending this to you. You voted to undo Glass-Steagall thus causing this mess. Undo your damage. Also, spending is not the same as appropriating. Artical One ; Sec 6 does not allow Congress any powers except the two listed in Sec 7. Get straight Bob.

  15. Justine says:

    Rep Marcy Kapur of Ohio had a Glass Steagal bill long time ago HR 129. Her bill would not wait for 5 years like Elizabeth Warren’s bill….what is the 5 year wait all about…..to give the financials more time to add loopholes and more pork? Really the Senate has S 985 which came long before Warren’s….. I wouldn’t trust what is behind Warren’s bill……..be leery very leery

  16. Brad M says:

    Considering who is behind the bill and some of their other political positions, campaign funding sources, and cronies ( and track records of lies or saving face ), I have some serious doubts about it. How many of the tbtf institutions will it really reach and seriously affect? Who will enforce it… how effective will they be? Maybe just the introduction of it and the dem-rep gathering on such a matter is a very positive first step though.

  17. Nathan says:

    Are we kidding? How many of our “elected” will vote against, or do anything to limit the risk-taking or earning-power of the VERY BANKS that keep and hold THEIR MILLIONS, (oh, and pay their dividends). Doubt it. Please contact YOUR congressional representatives (all) and support this legislation! Let them here you.

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