Robert Reich: Bring Back Glass-Steagall

and break up the too-big-to-fail banks. He promptly says he’s kidding, probably because he understands that either act is a political impossibility in the face of the nut-job Republicans (and too many of the Democrats) in Congress, not to mention President Obama and his crew of bankster-handlers.

From 1933 to 1980, the Glass-Steagall Act gave us the FDIC, providing us little folks depositing our relative pittance in a bank for safekeeping at least some government protection against loss of that relative pittance in the event the bank failed; prevented commercial banks from engaging in investment, and hence potentially in speculation, with depositors’ funds; and also prohibited a bank holding company from owning other financial institutions. In 1980 (the year of St. Ronald’s election) and 1999, two separate laws repealed all the regulatory effect and rendered commercial banks and investment banks effectively identical, apart from the federal FDIC insurance on commercial bank deposits. I suppose you could call the two repeal acts the Trust Me I’m A Bankster Acts.

But what has all this wonderful Reaganesque post-Glass-Steagall deregulation brought us?

Did banks take advantage of these new capabilities? Is the Pope Catholic? Do wild bears… oh, forget about wild bears in the woods. Banks not only engaged in previously forbidden activities, they frequently abused them to their own gain… and the American taxpayers’ loss.

Last week we saw an example: Bank of America… well, let’s let Reich tell us:

If you want more evidence, consider the fancy footwork by Bank of America in recent days. Hit by a credit downgrade last month, BofA just moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits. That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.

Right. BoA is “too big to fail,” and received lots of money from the government, more or less free of specific obligations, in the last years of the Bush administration and the first years of the Obama administration. Nothing… not one single bit of law… prevented BoA from shifting large portions of its probable speculative losses onto the backs of the American taxpayers. Clever, eh? Well, clever if you’re BoA; not so clever from the viewpoint of the taxpayers. None of us signed up to use our tax dollars to insure BoA against speculative losses… I don’t know about you, but I don’t have the kind of money that would take.

And now the really bad news: Obama and his appointees are the banksters’ best buddies, and about all this manipulation, some of which had a direct impact on the economic collapse a few years ago, Obama & Co. will do exactly… nothing.

Eat your shit like a good serf; you’re not going to get anything better.

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