The Gambler, Part II
Continuing with our comparison of a gambler versus a banker, there is a crucial distinction: a gambler uses his own money—a banker gambles with your money. In the Old West if a gambler were caught out in cold-blooded fraud of the everyday garden variety routinely practiced by some of our biggest banks, he’d first be shot through the heart and then dragged through the street behind a horse until there was nothing left of him.
In those days “regulation” consisted of a shot through the heart. In these more civilized times, our regulations are written by Congress. Modern day legislation arose in the wake of the stock market crash and the ensuing failure of many banks during The Great Depression. The Glass-Steagall Act made a distinction between commercial and investment banks, acting on the perception that unregulated bank investment in the stock market was one of the causes of the crisis.
In the years that followed, the financial community increasingly found fault with Glass-Steagall. It limited banking profits, and came to be considered an overreaction to the problems of the 1930s. “Consequently, to the delight of many in the banking industry (not everyone, however, was happy), in November of 1999 Congress repealed the GSA with the establishment of the Gramm-Leach-Bliley Act which eliminated the GSA restrictions against affiliations between commercial and investment banks. Furthermore, the Gramm-Leach-Bliley Act allows banking institutions to provide a broader range of services, including underwriting and other dealing activities.”
Fast forward to the banking crisis of 2008 and the stubborn recession/depression that followed. Twenty-five U. S. banks failed during that year. J. P. Morgan picked up the wreckage of Washington Mutual, making itself the largest bank in the U. S., ahead of Bank of America. Later it “rescued” Bear Stearns, while Bank of America bought Merrill Lynch.
The survivors, now unmistakably “too big to fail,” had not, at the same time, become better servants of the American people. Speaking of Bank of America, Matt Taibbi writes: “All the government bailouts succeeded in doing was to make the bank even more prone to catastrophic failure – and now that catastrophe might finally be at hand. Bank of America’s share price has plunged into the single digits, and the bank faces battles in courtrooms all over America to avoid paying back the hundreds of billions it stole from everyone in sight. Its credit rating, already downgraded to a few rungs above junk status, could plummet with the next bad analyst report, causing a frenzied rush to the exits by creditors, investors and stockholders – an institutional run on the bank.”
Suddenly it was inescapable—our bankers were greedy bastards, incapable of acting in the best interests of their clients. They had no more restraint than an habitué on a roll at Vegas. Since they couldn’t control themselves, maybe some regulations were called for. Out of the Democratically-controlled Congress in 2010 came the Dodd-Frank Wall Street Reform Act.
This is how Matt Taibbi describes the outcome in his Rolling Stone piece, How Wall Street Killed Financial Reform. “At 2,300 pages, the new law ostensibly rewrote the rules for Wall Street. It was going to put an end to predatory lending in the mortgage markets, crack down on hidden fees and penalties in credit contracts, and create a powerful new Consumer Financial Protection Bureau to safeguard ordinary consumers. Big banks would be banned from gambling with taxpayer money, and a new set of rules would limit speculators from making the kind of crazy-ass bets that cause wild spikes in the price of food and energy. There would be no more AIGs, and the world would never again face a financial apocalypse when a bank like Lehman Brothers went bankrupt.”
As in Taibbi’s companion article, Bank of America: Too Crooked to Fail, he documents how, while the congratulations were still flowing, forces were already at work to strip the legislation of the very elements that made it necessary in the first place. “The giant reform bill turned out to be like the fish reeled in by Hemingway’s Old Man – no sooner caught than set upon by sharks that strip it to nothing long before it ever reaches the shore. In a furious below-the-radar effort at gutting the law – roundly despised by Washington’s Wall Street paymasters – a troop of water-carrying Eric Cantor Republicans are speeding nine separate bills through the House, all designed to roll back the few genuinely toothy portions left in Dodd-Frank. With the Quislingian covert assistance of Democrats, both in Congress and in the White House, those bills could pass through the House and the Senate with little or no debate, with simple floor votes – by a process usually reserved for things like the renaming of post offices or a nonbinding resolution celebrating Amelia Earhart’s birthday.”
Taibbi’s disturbing account leaves little to the imagination. He presents five “strategies” banks skillfully use to circumvent or destroy the consumer protections in the bill. These strategies are carried out by lobbyists in the financial services industry, by legislators themselves (in the pay of the big banks), or even, incredibly enough, by appointees of the very administration that supported the bill. The scene is reminiscent of Julius Caesar, who, on his way to the forum, is set upon by friends and enemies alike who stab him to death for a supposedly higher purpose. The result of these attacks on Dodd-Frank is just as bloody and just as harmful to the cause of the people.
By design, very little of this destructive activity ever comes before the public eye. Banking regulations are not easy reading, and they probably require a lawyer’s training to understand them. But the results are already being felt, and they will only increase. If you care about your financial well-being and want to protect your credit, investments, and savings from the Gordon Geckos of the world, learn how to fight back! We’ll deal with that in Part 3 of The Gambler.
What can you do—you are only one person? True, but you are only “six degrees of separation,” on average, from any other person on Earth. You become powerful when you share information with your friends and ask them to share it with their friends—it becomes a global revolution. As Stephen King suggests in The Long Walk, when these “society-supported sociopaths” come, step aside, and find the strength to run…
Tags: Administration, AIG, Bank of America, banker, banking industry, bankrupt, Bear Stearns, commercial, Congress, Consumer Financial Protection Bureau, consumer protections, contracts, credit, credit rating, Democrats, depression, Dodd-Frank, Eric Cantor, Ernest Hemingway, Financial Services, floor vote, gambler, Gordon Gekko, Gramm-Leach-Bliley Act, Great Depression, hidden fees, investment bank, J.P. Morgan, junk, legislation, legislators, Lehman Brothers, market crash, Matt Taibbi, Merrill Lynch, money, mortgage, penalties, predatory lending, profit, recession, regulations, Republican, Rolling Stone, senate, speculators, taxpayers, too big to fail, Wall Street, Washington, Washington Mutual, White House
