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On The Tenth Year Anniversary Of The Worst Bill Ever Passed: Gramm Leach Bliley; Defining Monopoly Capture And TBTF
Reader Gubbmint Cheese submits the following observations on the 10th year of what could easily be the bill that set the seeds for the ultimate destruction of capitalism.
Ten Years of Monopoly Capture And One Trading Day Of Loss
http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html
Ask Joe Six Pack what the "Gramm Leach Bliley Bill" is and odds are pretty good you will get a blank stare in return. And yet some could argue it was one of the most damaging bills ever passed by the US.
At the time - (November 5th, 1999) - then Treasury Secretary Larry H. Summers said the highly touted bill would, "better enable American companies to compete in the new economy".
Co-sponsor of the bill Thomas Bliley was quoted as saying, "We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century". Glass-Stegall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer". [does the current corporate communist, central Fed planning regime count for anything?]
And Senator Bob Kerrey (D-NE) assured those few who were worried about the bill's passing that, "the concerns that we will have a meltdown like 1929 are dramatically overblown".
Byron Dorgan (D-ND) was one of those who were concerned about the bill. He said, "I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that which is true in the 1930's is true in 2010".
Is Mr. Dorgan correct? Are we looking at the GLB bill now and wishing that we didn't do it?
I guess the answer depends on who you ask..
After making $100 million or more in 116 out of 194 trading days, I'm sure the hard working folks at Goldman Sachs are wishing the GLB bill was celebrating its 40th anniversary.
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wonder if the kind gentleman from north dakota would give us an update on his legislation to start a select committee (with full subpeona power) to "investigate the financial crisis" ?
http://www.youtube.com/watch?v=TX-kdloaH2E&feature=channel_page
Don't know what's worse. Dorgan's monstrous comb-over or
Barney Frank's anal bleaching.
You can trace the beginnings of pulling down the GS act in 1979-80 when the banks pushed Carter into signing the DIDMCA increasing bank leverage. The big boom comes in 1982 when there was another bill passed. Tracing down the set of legislations pulling down Glass-Steagall was one of the first things I did last year.
March, 1980--Depository Institutions Deregulation and Monetary Control Act (DIDMCA) enacted. The law is a Carter Administration initiative aimed at eliminating many of the distinctions among different types of depository institutions and ultimately removing interest rate ceiling on deposit accounts. Authority for federal S&Ls to make ADC (acquisition, development, construction) loans is expanded. Deposit insurance limit raised to $100,000 from $40,000. This last provision is added without debate.
http://www.fdic.gov/bank/historical/s&l/
GS was kind of gutted around 1934 or so. The NY Banks didn't like one of the provisions, so they stopped issuing credit for over a year. Congress cried "Uncle" & removed the provision. Seed of destruction & all.
Magnificent point, phaesed, the DIDMCA - if memory serves - set the framework for the S&L meltdown, and, along with increasing bank leverage, it also overturned the anti-usury laws long in existence (I believe this came under Regulation Q).
Of course, following the Gramm-Leach-Bliley Act, which allowed for financial ultra-monopolies, we were screwed with the Commodity Futures Modernization Act of 2000, which allowed for ultra-leveraging by those ultramonopolies.
sgt_doom's amateurish timeline of doom:
1992: So, the Group of 30 approaches JPMorgan about checking into derivatives and then JPM issues the report -- Glass-Steagall: Overdue for Repeal - I guess that was JPM's answer.
1993: The Group of 30 begins promotion of widespread adoption of credit derivatives.
And Wendy Gramm pushes through Enron loophole while heading the Commodity Futures Trading Commission.
1995: JPMorgan (a la Blythe Masters and company) gives us the credit default swap (CDS)and a new flavor of collateralized debt obligations (CDO). Meanwhile, at another branch of JPMorgan, Terri Duhon is busy at work on their first BISTRO.
1997: Derivatives Policy Group is formed, further pushing for changes in legislation (Goldman Sachs, Morgan Stanley, Merrill Lynch, Credit Suisse First Boston, Lehman Bros. and Salomon Bros.)
1999: Gramm-Leach-Bliley Act (Financial Services Modernization Act) is finally enacted -- against the wishes and wise judgment of Brooksley Born, who didn't prevail against Robert Rubin, Alan Greenspan, Phil Gramm and Arthur Levitt.
2000: Commodity Futures Modernization Act of 2000 is enacted -- a giant loophole of loopholes for allowing zero oversight in credit derivatives trading, oil and energy, soft commodities speculation, etc.
2000 - 2001: InterContinental Exchange, TradeSpark (and various subsidiaries), Markit Group (along with Markit Wire, etc.), come into existence (gotta have your own exchanges and artificial pricing outfits, after all!).
2007: Collapse of the American banking system (Ssssshhh! Don't tell anyone, this is still a mystery to many!)
What is Phil and his wife Wendy (formally of CFTC & Enron) up to these days? Retired I hope. They have done enough damage.
Gramm was the financial industry's Darth Vader on Capitol Hill.
Don't forget that he and Wendy also worked through that stinking Commodity Futures Modernization Act 2000, which subsequently allowed for the electricity futures manipulation by Enron and the oil speculation fiasco of 2008. CFMA also allows for derivatives trading like wheat futures......another financial nuclear holocaust in waiting.
As I recall, Phil got a big paying job with UBS.
Gramm and McCain are good pals. When McCain was running for Prez, he trotted out Phil as his lead financial advisor. Then Phil coughs up his now-famous " we're a nation of whiners " speech. He blew himself up, thankfully.......and McCain too.
That sounds right as I remember. And Wendy got a seat on the Enron board for her steller work. If I remember right, Wendy was on the CFTC when the vote went though, along with Sheila Bair, who was the only one that voted against it. That's from memory so I could be wrong.
Phil was behind McCain which forced me to vote 3rd party, Gramm scared me more than any of them. I think you are right about UBS as well. I often wonder, knowing how Obama has kissed the bankers ass, how much different McCain would have been at this point. Other things might be different, but I have my doubts they would have taken on the bankers.
"I often wonder, knowing how Obama has kissed the bankers ass, how much different McCain would have been at this point."
Yeah, kinda makes one think things might not have been all that different if Al (I)Gore had actually been prez back in 2000. After all, his number two was "I stand behind Dick Cheney in everything" Joe Lieberman. And now (i)Gore is involved in his very own hedge fund, Generation Assets Management, with his three former-Goldman Sachs buddies, hoping to score big off the next wave of securitized financial instruments, carbon derivatives and carbon offsets.
LOL! We might be making the case it really doesn't matter. And we might be right.
OT:
The DOL initial jobless claim report is statistically impossible.
States that had increases of >1000:
12 states, for a total jobless claim increase of 35,430
States that had decreases of > 1000:
2 states, for a claim decrease of 3825
That nets to a jobless claim increase of 31,605 with 37 states, D.C. and the Virgin Islands remaining. If you divide 31,605 by the remaining states/territories (39), you would need an average decrease of 810 in every state! There's no way in hell this adds up, because obviously there would be a number of states that had increases of < 1000, as well as states that had decreases of < 800.
Added: This report is a bold faced lie, and someone needs to hold the DOL responsible.
Added: I forgot to factor in the supposed 14,216 person drop, so let's recalculate:
(31605 + 14216) / 39 = 1174 per state! LOL!
http://www.dol.gov/opa/media/press/eta/ui/eta20091337.htm
Sancho, your calcs seem right. And you're using NSA data. Something isn't right. 12 states with an increase over 1000. 2 states with a decrease over 1000 but somehow the stuff in between ends up being a 14,216 dip? This seems statistically like goldman losing on only 1 trading day in a "fair market" quarter.
I generally do not trust government economic data. However, there might be a reasonable explanation for the discrepancy you cite. Just above the list of state increases/decreases, note the DOL press release heading: "UNADJUSTED INITIAL CLAIMS FOR WEEK ENDED 10/24/2009".
So I think you have to compare the data for weeks ending 10/17 and 10/24. From 10/17 to 10/24 there was an increase of (494,394-460,430) = 33,964. The states broken out accounted, as you said, for an increase of 31,605. Thus the remaining 39 states/territories accounted for a net increase in initial claims of (33,964-31,605) = 2,359, which is about 60.5 claims per state/territory. So it's statistically possible. Not actually saying I believe their lies and bullshit, which strike me as more and more akin to the Five Year Plans from the former Soviet Union.
Good catch, SM. I was comparing apples to oranges.
Hope. Change.
Absolute regulatory capture.
Looks to me like GLB was meant to, and succeeded in, allowing a few banksters to take over the federal government and start confiscating the nation's wealth.
Of course - how else can you explain the near unanimous support among our elected "leaders" at the time (the final votes on GLB were 90-8 in the Senate and 362-57 in the House - you can barely get a resolution extolling the virtues of Motherhood and Apply Pie through with those sorts of margins).
OK, I think I fixed all the dyslexia and typos - sorry about that.
Is this self regulate?
Ummm. Weren't the investment banks that DIDN'T have bank balance sheets the ones that failed and put the financial system into crisis? (except Citi of course, which should have failed in 1982 and been given Mexico as punishment).
I'll never forget the queasy feeling I had when they took down Glass-Steagal.
We were fine with it as it was. It was nothing more than a power/$$$ grab by the biggest banks
done by their bitches/congress/Clinton. It would have been Bush if he were there.
Bonddude,
"done by their bitches/congress/Clinton. It would have been Bush if he were there"
We have to burn this line in our minds.
We have to stay on message...
There is no distinction between the Reps and Dems, only minor differentiation for marketing purposes only, er voting purposes only.
They play you against me, and never against them.
"There is no distinction between the Reps and Dems..."
Well said! Well said! One need only observe and track ALL the presidential appointments of present and previous administrations going back to Carter and Nixon----they are either frequently the same, or the proteges or mentors of each other.
While I could go on and on about forty or so of Obama's appointments; suffice to say, Diana Farrell is a classic toxic appointment: anti-worker, anti-union, anti-American.
Nothing need more be said on this matter!
A good summary of the history of the dismantling of Glass-Steagall and the Bank Holding Company Act
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html
So where is "Larry" now? Atop the world. Because he is one of the "best and brightest". Just as the people at GS. A bunch of "geniuses" and we, the rest, just a bunch of idiots who do not understand anything.
Wrong. The Fed caused the bubble and the crash, not GS.
Anon, dood, the Fed is simply a subsidiary of Goldman Sucks, JPMorgan Chase and Morgan Stanley --- get with the program, dood!
Bitch all you want about individual bills and action on one being the supposed demise of an entire market, so long as you have a regulatory body operating without any accountability that does not require any active participation by disseminators of it's information, you will always have these kinds of issues - regardless of what bill is passed, not passed, or repealed. Businesses operate under the interpretation of the law seeking an immediate competetive advantage, and will do so until a) it's unprofitable and/or (sometimes) b) it's illegal. Offloading the regulatory burden from the private investor to a public agency does nothing but increase the regulatory costs while decreasing the quality of oversight and giving investors the false sense of security that "someone is watching the road". This whole notion that a group of people hired under the ideal premise of national duty under an incentive structure of political favor with the only real payout being a back-door into the financial sector (or not having to compete there, for that matter) is somehow capable of providing a Good Housekeeping Seal of Approval on the US financial markets is ricockulous, at best. This doesn't bring up the idea whether or not ~3,500 people with a spending authority of ~$1B is adequate enough to cover the breadth and scope of trillions of dollars of economic activity.
Both your argument and reasoning are entirely specious, Nopat!
The laws, especially the tax structure, in the US were completely restructured beginning around 1978 and continuing on to the present.
This allowed for tax breaks for corporations when they laid off American workers and offshored their jobs (legislation created and passed by the Black Congressional Caucus, 1978 or thereabouts), as well as tax laws enacted giving us those rape-and-pillage leveraged buyouts by private equity firms, and the resulting debt-financed billionaires.
Likewise, the ultraleveraging from securitized credit derivatives, etc., etc., etc.
The lawyer in me is confused. Your statments seem to contradict each other. Is the problem "offloading the regulatory burden" to a "public" entity or a "regulatory body operating without any accountability?" Too many rules or too much corruption? Regulations are just laws. Some really are more important, more profound, and more effective than others. I don't think you'd argue the Bill of Rights are pointless. They're certainly being honored less and less these days but that's not because the authors sucked. Most of those on the list are pretty important "regulations." It's no different here. This was a big one and it had big consequences. The overall corruption or ineffectiveness of government is a separate question from the intelligence or justice of particular laws