By contributing author E. Henry Schoenberger
Elizabeth Warren, joined by John McCain, has introduced the most crucially significant bill since 1933 to control the sociopathic greed and the egregious untenable risk of Trojan Wall Street Mega Banks like: JP Morgan Chase, Well Fargo, Citi, Goldman Sachs, Morgan Stanley and Bank of America for example. Glass-Steagall separated commercial banks from the investment side of bank that created the most fundamental risk of bank failure.
Today – with $700 trillion to $1.2 quadrillion in swap derivatives circling the globe like a giant H-bomb sized financial plague–just waiting for a detonator to unleash a financial disaster like a worldwide tsunami–there is a critical crucial need to shift the risk back to the financial innovators who have profited from all the “too complex to explain” risk, but have placed our Treasury and country in dire jeopardy.
From How We Got Swindled By Wall Street Godfathers, Greed & Financial Darwinism: The 30-Year War Against The American Dream:
Chapter 5 Greedy Deregulated Banks Abandoned Prudence and Reason for Fees and Bonuses
“…Glass-Steagal was enacted in 1933, in the wake of the Great Depression, in order to prevent overly large commercial banks being involved with stock market investment. It was clear that huge banks had taken huge risks with depositors’ assets as well as with their own by buying new issues, lending money to companies whose stock they invested in, and encouraging their customers to invest in their investments. The consensus then was that banking activities were the fundamental cause of the depression due to bankers’ unbridled, greedy appetite for the vast rewards to be had from egregiously leveraged, highly speculative risky investments. Banks were allocated one year to decide whether they wanted to specialize in commercial banking or investment banking, because Glass-Steagal set up a regulatory fire-wall between the two types of activities. This was primarily designed to preserve banking assets in the event risk underwriting failed. And it seems that risk underwriting then, like today, was done essentially to justify participation in selling anything – no matter how much leverage – to generate fees.
By 1999 all was forgotten and all the lobbying to allow all financial entities to get into each other’s business (pants) resulted in huge profits for Wall Street and Banks, profits which were not properly added to surplus for stability but paid out as bonuses. All the CEO and executive officers became Bull Market geniuses in the race to pile individual incomes, fees and bonuses higher than Mt Everest. The Gramm-Leach-Bliley Act of 1999 repealed: the Banking Act of 1933 known as Glass-Steagal; and the Bank Holding Company Act of 1956, which prevented bank holding companies headquartered in one state from acquiring a bank in another state and from engaging in the insurance business – further, the approval of Federal Reserve Board was required under this act to establish a bank holding company. Graham-Leach-Bliley, once again, allowed Mega, Trojan-like Banks to come alive, like dinosaurs rising from the dead to gobble up our economy as they did in 1929….”
Dodd-Frank could not stop a tiny tsunami. Dodd is illusory at best and our treasury is on the line unless we mandate that sociopathic swine banks assume the risk of their own greed.
Former Sen. Phil Gramm (R-TX) was the lead sponsor of the legislation, Gramm-Leach-Bliley, that repealed the final sections of Glass-Steagall as well as the 1956 Bank Holding Company Act.
Click on this link for Warren-McCain’s legislative text, which includes the following definition of “securities entity” for the purpose of its regulations:
(I) includes any entity engaged in–
(aa) the issue, flotation, underwriting, public sale, or distribution of stocks, bonds, debentures, notes, or other securities;(bb) market making;
(cc) activities of a broker or dealer, as those terms are defined in section 3(a) of the Securities Exchange Act of 1934;
(dd) activities of a futures commission merchant;
(ee) activities of an investment adviser or investment company, as those terms are defined in the Investment Advisers Act of 1940 and the Investment Company Act of 1940, respectively; or
(ff) hedge fund or private equity investments in the securities of either privately or publicly held companies; and
(II) does not include a bank that, pursuant to its authorized trust and fiduciary activities, purchases and sells investments for the account of its customers or provides financial or investment advice to its customers.
This is very specific and not open to elastic interpretation, so it will be seen as harmful by large banks. Because, if regulators do their job with integrity – it will require major banks to spin-off investment (and insurance) divisions, greatly reducing their size and scale – and shift all the risk of the financial innovators back to where it belongs, on the heads of the profiteers.
This is the most significant financial proposal to regulate greed in 6 decades, and it must pass legislation. So get behind Elizabeth and McCain who is seeking redemption in a material way. Americans need to understand this because our financial future is really on the line, and when you read the language in this bill and understand the context you will get it.
Check out Henry’s brilliant book here: