Re: Stooper Bowl Hype!!!!

Neil X. wrote:

Please. 99% of the problems that went down during the Bush
administration are directly traceable to Dubya. Clinton's policies
didn't bring us to the dire straits were are in, Bush's did. Just ask
yourself, how much better off would we be as a nation if we were able
to spend all of the money we've squandered in Iraq fixing the economy
instead? Bush is responsible for what went on during his watch.
Shifting the blame to previous administrations is appealing to the
Clinton haters, but it doesn't stand up to scrutiny.

Peace,
Neil X.

I'm not denying one particle of the Bush administration's responsibility,
it's massive, and the gazillions of dollars pissed away in Iraq has clearly
been a massive waste. Nor did I attempt to "shift *the* blame" [my
emphasis] to previous administrations. But *some* of the blame does indeed
belong to previous administrations [note plural] unless you can somehow
construct a scenario in which the legalization of Credit Default Swaps (for
example) is somehow totally unrelated to the recent mortgage meltdown, in
which case Clinton signing the Commodity Futures Modernization Act in 2000
and the key role CDSs played in the collapse of huge investment firms
recently are somehow miraculously unrelated.

It cracks me up, this religious fervor whereby even glancing at any of the
regrettable stuff Clinton signed off on (NAFTA anyone?) puts one in the
company of "Clinton haters." And Heaven forbid we should look one day past
the Bush administration for the origins on the sorry state we're in now,
hell no, it cannot be! Republican deregulation bad, Democrat deregulation
good--that's that and don't ask any more questions because we don't want to
know any more than that. Kind of tough to do much in the way of "scrutiny"
when even a hint of an echo of a possibility that Bill's administration
might have left some DNA on this crisis gives you an attack of the vapors.

Or perhaps I'm wrong, after all, if Clinton himself defends a deregulation
bill crafted by Republicans which he signed then it couldn't possibly have
contributed to today's economic mess, no way!

http://www.businessweek.com/magazine/content/08_40/b4102000409948.htm

"MARIA BARTIROMO
Mr. President, in 1999 you signed a bill essentially rolling back
Glass-Steagall and deregulating banking. In light of what has gone on, do
you regret that decision?

FORMER PRESIDENT BILL CLINTON
No, because it wasn't a complete deregulation at all. We still have heavy
regulations and insurance on bank deposits, requirements on banks for
capital and for disclosure. I thought at the time that it might lead to more
stable investments and a reduced pressure on Wall Street to produce
quarterly profits that were always bigger than the previous quarter. But I
have really thought about this a lot. I don't see that signing that bill had
anything to do with the current crisis. Indeed, one of the things that has
helped stabilize the current situation as much as it has is the purchase of
Merrill Lynch (MER) by Bank of America (BAC), which was much smoother than
it would have been if I hadn't signed that bill.


Phil Gramm, who was then the head of the Senate Banking Committee and until
recently a close economic adviser of Senator McCain, was a fierce proponent
of banking deregulation. Did he sell you a bill of goods?


Not on this bill I don't think he did. You know, Phil Gramm and I disagreed
on a lot of things, but he can't possibly be wrong about everything. On the
Glass-Steagall thing, like I said, if you could demonstrate to me that it
was a mistake, I'd be glad to look at the evidence. But I can't blame [the
Republicans]. This wasn't something they forced me into. I really believed
that given the level of oversight of banks and their ability to have more
patient capital, if you made it possible for [commercial banks] to go into
the investment banking business as Continental European investment banks
could always do, that it might give us a more stable source of long-term
investment."


Get real Neil, try a little scrutiny that doesn't deny even the possibility
of a Democrat being involved in any mess. Note the last paragraph below,
it's a real grabber. Too bad St. Bill didn't employ a late-term veto or two
on this deregulation, instead he's still defending it. And despite
everything we've seen in the news in recent months, you can still convince
yourself none of this had anything to do with the financial meltdown,
infreakingcredible.

http://piggington.com/clinton_republicans_agree_to_deregulation_of_us_financial_system

By Martin McLaughlin
1 November 1999

An agreement between the Clinton administration and congressional
Republicans, reached during all-night negotiations which concluded in the
early hours of October 22, sets the stage for passage of the most sweeping
banking deregulation bill in American history, lifting virtually all
restraints on the operation of the giant monopolies which dominate the
financial system.

The proposed Financial Services Modernization Act of 1999 would do away with
restrictions on the integration of banking, insurance and stock trading
imposed by the Glass-Steagall Act of 1933, one of the central pillars of
Roosevelt's New Deal. Under the old law, banks, brokerages and insurance
companies were effectively barred from entering each others' industries, and
investment banking and commercial banking were separated.

The certain result of repeal of Glass-Steagall will be a wave of mergers
surpassing even the colossal combinations of the past several years. The
Wall Street Journal wrote, "With the stroke of the president's pen,
investment firms like Merrill Lynch & Co. and banks like Bank of America
Corp., are expected to be on the prowl for acquisitions." The financial
press predicted that the most likely mergers would come from big banks
acquiring insurance companies, with John Hancock, Prudential and The
Hartford all expected to be targeted.

Kenneth Guenther, executive vice president of Independent Community Bankers
of America, an association of small rural banks which opposed the bill,
warned, "This is going to begin a wave of major mergers and acquisitions in
the financial-services industry. We're moving to an oligopolistic
situation."

One such merger was already carried out well before the passage of the
legislation, the $72 billion deal which brought together Citibank, the
biggest New York bank, and Travelers Group Inc., the huge insurance and
financial services conglomerate, which owns Salomon Smith Barney, a major
brokerage. That merger was negotiated despite the fact that the merged
company, Citigroup, was in violation of the Glass-Steagall Act, because
billionaire Travelers boss Sanford Weill and Citibank CEO John Reed were
confident of bipartisan support for repeal of the 60-year-old law.

Campaign of influence-buying

They had good reason, to be sure. The banking, insurance and brokerage
industry lobbyists have combined their forces over the last five years to
mount the best-financed campaign of influence-buying ever seen in
Washington. In 1997 and 1998 alone, the three industries spent over $300
million on the effort: $58 million in campaign contributions to Democratic
and Republican candidates, $87 million in "soft money" contributions to the
Democratic and Republican parties, and $163 million on lobbying of elected
officials.

The chairman of the Senate Banking Committee, Texas Republican Phil Gramm,
himself collected more than $1.5 million in cash from the three industries
during the last five years: $496,610 from the insurance industry, $760,404
from the securities industry and $407,956 from banks.

During the final hours of negotiations between the House-Senate conference
committee and White House and Treasury officials, dozens of well-heeled
lobbyists crowded the corridors outside the room where the final deal-making
was going on. Edward Yingling, chief lobbyist for the American Bankers
Association, told the New York Times, "If I had to guess, I would say it's
probably the most heavily lobbied, most expensive issue" in a generation.

While Democratic and Republican congressmen and industry lobbyists claimed
that deregulation would spark competition and improve services to consumers,
the same claims have proven bogus in the case of telecommunications,
airlines and other industries freed from federal regulations. Consumer
groups noted that since the passage of a 1994 banking deregulation bill
which permitted bank holding companies to operate in more than one state,
both checking fees and ATM fees have risen sharply.

Differing versions of financial services deregulation passed the House and
Senate earlier this year, and the conference committee was called to work
out a consensus bill and avert a White House veto. The principal bone of
contention in the last few days before the agreement had nothing to do with
the central thrust of the bill, on which there was near-unanimous bipartisan
support.

The sticking point was the effort by Gramm to gut the Community Reinvestment
Act, a 1977 anti-redlining law which requires that banks make a certain
proportion of their loans in minority and poor neighborhoods. Gramm blocked
passage of a similar deregulation bill last year over demands to cripple the
CRA, and bank lobbyists were in a panic, during the week before the deal was
made, that the dispute would once again prevent any bill from being adopted.

Gramm and other extreme-right Republicans saw the opportunity to damage
their political opponents among minority businessmen and community groups,
who generally support the Democratic Party. Gramm succeeded in inserting two
provisions to weaken the CRA, one reducing the frequency of examinations for
CRA compliance to once every five years for smaller banks, the other
compelling public disclosure of loans made under the program.

The latter provision was particularly offensive to black and other minority
business and community groups, who have used the CRA provisions as a lever
by threatening to challenge mergers and other bank operations which require
government approval. In most such cases, the banks have offered loans to
businessmen or outright grants to community groups in return for dropping
their legal actions. These petty-bourgeois elements have been able to
posture as defenders of the black or Hispanic community, while pocketing
what are essentially payoffs from finance capital and concealing from the
public the details of this relationship.

The banks and other financial institutions did not themselves oppose
continuation of the CRA, which they have treated as nothing more than a cost
of doing a highly profitable business in minority areas. Loans tied to the
CRA average a 20 percent rate of return. Financial industry lobbyists
complained that they were being caught in a crossfire between the
Republicans and Democrats which was unrelated to the main purpose of the
bill.

The Clinton White House threatened to veto the bill if CRA provisions were
substantially weakened, in response to heavy pressure from the Congressional
Black Caucus and the Reverend Jesse Jackson, whose Operation PUSH has made
extensive use of CRA in its campaigns to pressure corporations and banks for
more opportunities for black businessmen. But eventually the White House
caved in to Gramm, accepting his amendments so long as the program remained
formally in place.

The White House similarly retreated on pledges that consumer privacy would
be protected in the legislation. Consumer groups pointed to the potential
for abuse of financial information once giant conglomerates were created
which would handle loans, investments and insurance at the same time. For
example: a bank could refuse to give a 30-year mortgage to a customer whose
medical records, filed with the bank's insurance subsidiary, revealed a
fatal disease.

The final draft of the bill contains a consumer privacy protection clause,
but it is extremely weak, applying only to the transfer of information
outside of a financial conglomerate, not within it. Thus Citigroup will be
able to pass on financial information about its bank depositors to Travelers
Insurance, but not to an outside company like Prudential. Even that
limitation would be breached if there was a contractual relationship with
the outside company, as in the case of a telemarketer which did work for
Citigroup and was given private information about Citigroup depositors to
aid in its telephone solicitations.

Threat to financial stability

The proposed deregulation will increase the degree of monopolization in
finance and worsen the position of consumers in relation to creditors. Even
more significant is its impact on the overall stability of US and world
capitalism. The bill ties the banking system and the insurance industry even
more directly to the volatile US stock market, virtually guaranteeing that
any significant plunge on Wall Street will have an immediate and
catastrophic impact throughout the US financial system.

The Glass-Steagall Act of 1933, which the deregulation bill would repeal,
was not adopted to protect consumers, although one of its most celebrated
provisions was the establishment of the Federal Deposit Insurance
Corporation, which guarantees bank deposits of up to $100,000. The law was
enacted during the first 100 days of the Roosevelt administration to rescue
a banking system which had collapsed, wiping out the life savings of
millions of working people, and threatening to bring the profit system to a
complete standstill.

As a recent history of that era notes: "The more than five thousand bank
failures between the Crash and the New Deal's rescue operation in March 1933
wiped out some $7 billion in depositors' money. Accelerating foreclosures on
defaulted home mortgages-150,000 homeowners lost their property in 1930,
200,000 in 1931, 250,000 in 1932-stripped millions of people of both shelter
and life savings at a single stroke and menaced the balance sheets of
thousands of surviving banks" (David Kennedy, Freedom from Fear, Oxford
University Press, 1999, pp. 162-63).

The separation of banking and the stock exchange was ordered in response to
revelations of the gross corruption and manipulation of the market by giant
banking houses, above all the House of Morgan, which organized huge
corporate mergers for its own profit and awarded preferential access to
share issues to favored politicians and businessmen. Such insider trading
played a major role in the speculative boom which preceded the 1929 crash.

Over the past 20 years the restrictions imposed by Glass-Steagall have been
gradually relaxed under pressure from the banks, which sought more
profitable outlets for their capital, especially in the booming stock
market, and which complained that foreign competitors suffered no such
limitations to their financial operations. In 1990 the Federal Reserve Board
first permitted a bank (J.P. Morgan) to sell stock through a subsidiary,
although stock market operations were limited to 10 percent of the company's
total revenue. In 1996 this ceiling was lifted to 25 percent. Now it will be
abolished.

The Wall Street Journal celebrated the agreement to end such restrictions
with an editorial declaring that the banks had been unfairly scapegoated for
the Great Depression. The headline of one Journal article detailing the
impact of the proposed law declared, "Finally, 1929 Begins to Fade."

This comment underscores the greatest irony in the banking deregulation
bill. Legislation first adopted to save American capitalism from the
consequences of the 1929 Wall Street Crash is being abolished just at the
point where the conditions are emerging for an even greater speculative
financial collapse. The enormous volatility in the stock exchange in recent
months has been accompanied by repeated warnings that stocks are grossly
overvalued, with some computer and Internet stocks selling at prices 100
times earnings or even greater.

And there is a much more recent experience than 1929 to serve as a
cautionary tale. A financial deregulation bill was passed in the early 1980s
under the Reagan administration, lifting many restrictions on the activities
of savings and loan associations, which had previously been limited
primarily to the home-loan market. The result was an orgy of speculation,
profiteering and outright plundering of assets, culminating in collapse and
the biggest financial bailout in US history, costing the federal government
more than $500 billion. The repetition of such events in the much larger
banking and securities markets would be beyond the scope of any federal
bailout.


.

Relevant Pages

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