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"A 21st Century Glass-Steagall Act"

Tyler Durden's picture




 

We are confident the following amusing bill titled grandiosely enough "A 21st Century Glass-Steagall Act" (the Bill text here) by Elizabeth Warren, John McCain et al, to pretend Congress is not a bought and paid for by Wall Street marionette, will have a last minute rider that says "Compliance with any or all of the above provisions is purely voluntary."

From Elizabeth Warren

Senators Warren, McCain, Cantwell, and King Introduce 21st Century Glass-Steagall Act

Senators Elizabeth Warren (D-MA), John McCain (R-AZ), Maria Cantwell (D-WA), and Angus King (I-ME) today will introduce the 21st Century Glass-Steagall Act, a modern version of the Banking Act of 1933 (Glass-Steagall) that reduces risk for the American taxpayer in the financial system and decreases the likelihood of future financial crises.

The legislation introduced today would separate traditional banks that have savings and checking accounts and are insured by the Federal Deposit Insurance Corporation from riskier financial institutions that offer services such as investment banking, insurance, swaps dealing, and hedge fund and private equity activities. This bill would clarify regulatory interpretations of banking law provisions that undermined the protections under the original Glass-Steagall and would make "Too Big to Fail" institutions smaller and safer, minimizing the likelihood of a government bailout.

"Since core provisions of the Glass-Steagall Act were repealed in 1999, shattering the wall dividing commercial banks and investment banks, a culture of dangerous greed and excessive risk-taking has taken root in the banking world," said Senator John McCain. "Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits. If enacted, the 21st Century Glass-Steagall Act would not end Too-Big-to-Fail.  But, it would rebuild the wall between commercial and investment banking that was in place for over 60 years, restore confidence in the system, and reduce risk for the American taxpayer."

"Despite the progress we've made since 2008, the biggest banks continue to threaten the economy," said Senator Elizabeth Warren.  "The four biggest banks are now 30% larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk.  The 21st Century Glass-Steagall Act will reestablish a wall between commercial and investment banking, make our financial system more stable and secure, and protect American families."

"Too many Main Streets across America have paid the price for risky gambling on Wall Street," Senator Maria Cantwell said. "This bill would restore clear bright lines that separate risky activities from the traditional banking system. It's time to restore faith in our financial institutions by rebuilding the firewall that protected our economy for decades in the wake of the Great Depression. Restoring Glass-Steagall would focus our financial system where it belongs: getting capital into the hands of job creators and businesses on Main Streets across America."

"As Maine families continue to feel the sting of the 2008 economic downturn, America's largest financial institutions continue to engage in risky banking and investment activities that threaten the health of our financial sector and our economy as a whole. While recent efforts at financial sector regulatory reform attempt to address the ‘too big to fail' phenomenon, Congress must take additional steps to see that American taxpayers aren't again faced with having to bail out big Wall Street institutions while Main Street suffers," Senator Angus King said. "While the 21st Century Glass-Steagall Act is not the silver bullet to end ‘too big to fail,' the legislation's re-establishment of clear separations between retail and investment banking, as well as its restrictions on banking activities, will limit government guarantees to insured depository institutions and provide strong protections against the spillover effects should a financial institution fail."

The original Glass-Steagall legislation was introduced in response to the financial crash of 1929 and separated depository banks from investment banks. The idea was to divide the risky activities of investment banks from the core depository functions that consumers rely upon every day.  Starting in the 1980s, regulators at the Federal Reserve and the Office of the Comptroller of the Currency reinterpreted longstanding legal terms in ways that slowly broke down the wall between investment and depository banking and weakened Glass-Steagall. In 1999, after 12 attempts at repeal, Congress passed the Gramm-Leach-Bliley Act to repeal the core provisions of Glass-Steagall.

* * *

Let the laughter commence.

 

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Thu, 07/11/2013 - 12:50 | 3741903 km4
km4's picture

Iran asks India to settle all oil payment in rupees - sources http://news.yahoo.com/iran-asks-india-settle-oil-154833878.html via @YahooNews

Thu, 07/11/2013 - 12:52 | 3741911 Ahmeexnal
Ahmeexnal's picture

A rupee in hand is worth 100,000 euros in a bank.

Thu, 07/11/2013 - 12:55 | 3741927 malikai
malikai's picture

I'm sure Mrs. Warren will make the windows look very nice before the hurricane arrives.

I'll bet the flower bed will be lovely as well.

Thu, 07/11/2013 - 13:05 | 3741972 DaveyJones
DaveyJones's picture

Yes, they should call it the Glass-Houses Act

Thu, 07/11/2013 - 13:21 | 3742006 101 years and c...
101 years and counting's picture

in an effort to thank those responsible for destroying capitalism in 1999, here is the vote to throw away Glass Steagall in the first place:

http://www.govtrack.us/congress/votes/106-1999/s354

Thu, 07/11/2013 - 13:33 | 3742035 NoDebt
NoDebt's picture

It's easy to propose legislation you know won't pass.  This is just to placate some voting block somewhere to say "we tried to do something."

Go get Sandy Weil to convince Obama to support it.  Cause lord knows, Obama has been SO tough on the banks he would probably support this in a hot minute.  Speaking of which, where is that "I didn't know anything about it, I had nothing to do with it" president anyway?  Probably better not to ask, I guess.

Thu, 07/11/2013 - 15:50 | 3742571 Buckaroo Banzai
Buckaroo Banzai's picture

Hard to take Princess Lie-awatha seriously about anything. Faux-cahantas can go piss up a rope.

Thu, 07/11/2013 - 17:58 | 3743037 xtop23
xtop23's picture

Yup.

McCain's name is attached to it.... that should be enough to know that it's simply grandstanding and has no possible chance in your wildest drug induced hallucinations of passing.

Now.......if you perhaps added a rider that would send aid to our cannabalistic, middle eastern, regime change proxies for a cool $100bn..... THEN you're cooking with gasoline.

Can him, Harry Reid, and Lindsey Graham hurry up and have lethally debilitating strokes already?

Fri, 07/12/2013 - 13:15 | 3745815 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Sanford Weill advocating for a 21-century Glass-Steagall...

While I know it is a true fact I still am unable to comprehend it.  It seems like it should please me but it just makes me feel confused and a little bit nauseous. 

Thu, 07/11/2013 - 13:18 | 3742000 financial apoca...
financial apocalyptic contagion's picture

haha very clever ahmeexal right on

although rupee in hand right now is usually after taking a shit
cant wait to wipe with a benjamin soon, as soon as it can't even buy me a decent sized line to start the day with  

Thu, 07/11/2013 - 12:56 | 3741931 DoChenRollingBearing
DoChenRollingBearing's picture

How curious, I would have thought Iran would have preferred Indian gold.  I wonder what Indian products Iran would want with their rupees...

Thu, 07/11/2013 - 15:41 | 3742538 Marco
Marco's picture

Basically everything ...

"The two countries had been trying to reduce New Delhi's debts by promoting exports and India recently said it would allow goods to be imported for re-export to Iran as long as they added value of at least 15 percent, to encourage trade."

This is a very dangerous game for India, the countries with sanctions against Iran are not going to like this, guess India really needs the money ...

Thu, 07/11/2013 - 12:51 | 3741905 Ahmeexnal
Ahmeexnal's picture

Did McCocaine have a moment of lucidity?

Thu, 07/11/2013 - 12:56 | 3741930 Flakmeister
Flakmeister's picture

He can be surprising at times, the Alzheimers will kick in and he will deny saying anything in about a month...

Thu, 07/11/2013 - 13:09 | 3741983 DaveyJones
DaveyJones's picture

I know. His wife told me that sometimes, in his sleep, he starts yelling something about Charles Keating, Speed Racers Car, and to stop counting the fingers on his left hand.  

Thu, 07/11/2013 - 15:52 | 3742582 Buckaroo Banzai
Buckaroo Banzai's picture

McCain is a lying sack of shit. If he's behind this, you can bet it isn't going anywhere. It is political grandstanding of the most craven sort.

Thu, 07/11/2013 - 14:18 | 3742203 Ferrari
Ferrari's picture

Isn't it easy to back a bill, for posterity's sake, that you know has no hope of passing or damaging the extant regime?

Thu, 07/11/2013 - 12:54 | 3741922 buzzsaw99
buzzsaw99's picture

smaller tbtf, that's a great idea! make our fascist institutions smaller, yeah, that's wonderful. what a brilliant concept.

Thu, 07/11/2013 - 12:54 | 3741923 Flakmeister
Flakmeister's picture

Too little, too late or so the old saw goes....

Thu, 07/11/2013 - 12:57 | 3741937 malikai
malikai's picture

Opensecrets implies that she might actualy be genuine in some slight manner.

Thu, 07/11/2013 - 12:58 | 3741944 pods
pods's picture

Maybe this is a sign that all the "bank holding companies" have finally hidden all their shit assets at the FED, skimmed their take off laundering Treasuries, and can now stand on their own again?

And it only took 5+ years!  Remarkable.

pods

Thu, 07/11/2013 - 14:21 | 3742215 Flakmeister
Flakmeister's picture

That could well be the case..

Thu, 07/11/2013 - 13:06 | 3741977 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

...and they're going to hold Jon Corzine criminally responsible for his actions, too.

HEAD FAKE -- gotcha on that one!  You believed us too! HAHAHAHAHA

I think someone has a really sick sense humor.  The 21st Century Glass Steagall act will be the same as it has been since the end of the 20th Century.

Thu, 07/11/2013 - 13:51 | 3742090 Lore
Lore's picture

The psychopaths are taking us in a direction that doesn't resolve nicely. It is going to be terrible.

Thu, 07/11/2013 - 14:40 | 3742280 Flakmeister
Flakmeister's picture

You got the tense wrong, it is "took"....

Thu, 07/11/2013 - 16:19 | 3742673 Lore
Lore's picture

Oh no, it's still in progress and going to get far worse. Have you ever worked with one of them?  They lack conscience. There is no limit to the evil that they will commit in order to get what they want. This is the simple but profound understanding that must be reached before appropriate action can be taken.

Thu, 07/11/2013 - 12:54 | 3741924 twh99
twh99's picture

Why don't they just repeal the Gramm-Leach-Bliley Act which would put back the original Glass-Steagel Act?

To my way of thinking that would be a good first step.

Thu, 07/11/2013 - 12:58 | 3741946 Quinvarius
Quinvarius's picture

Because McCain wants his own bill so he will be the focal point of the bribes as it is altered.

Thu, 07/11/2013 - 13:02 | 3741959 Strut
Strut's picture

Ding, Ding, Ding! We have a winner!

Thu, 07/11/2013 - 13:07 | 3741979 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Always more, never less.

Thu, 07/11/2013 - 15:26 | 3742480 RockyRacoon
RockyRacoon's picture

Repealing GLBA is not an option.  So many changes or work-arounds were done with the original Glass-Steagall provisions (sections) of the Banking Act of 1933 that Glass-Steagall was watered down.  A new act with clear provisions would help solve the problems.

https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act#Glass.E2.80.93S...

https://en.wikipedia.org/wiki/Banking_Act_of_1933#Banking_Act_of_1933

Glass–Steagall developments from 1935 to 1991

Thu, 07/11/2013 - 12:56 | 3741932 Quinvarius
Quinvarius's picture

Why do I have to be an "American Tax Payer" to be considered worthy of having my anger noted in this bill?  They fkd the whole GD planet, to include all American Citizens, born or unborn.  Only the dead have been immune from this jackassery.

Thu, 07/11/2013 - 13:15 | 3741994 malikai
malikai's picture

Which dead?

American dead?

Fri, 07/12/2013 - 03:46 | 3744269 swiss chick
swiss chick's picture

Grateful dead?

Thu, 07/11/2013 - 12:56 | 3741936 AlamoJack
AlamoJack's picture

Whatcha' bet that CREDIT UNIONS get the big DIK, uh, I mean McCain, in this bill.  Gosh, history does repeat.

Thu, 07/11/2013 - 12:58 | 3741940 Tinky
Tinky's picture

Perhaps they could provide some high-quality alfalfa for the horses that have left the barn, as well.

Thu, 07/11/2013 - 12:59 | 3741950 buzzsaw99
buzzsaw99's picture

Be afraid, john mccain wants to do something.

Thu, 07/11/2013 - 13:01 | 3741954 Zen Bernanke
Zen Bernanke's picture

perhaps they should also address the runaway federal reserve banking system, which most assuredly does not act in the best interests of the citizens.  

Thu, 07/11/2013 - 13:02 | 3741961 sleigher
sleigher's picture

They remove the law in 99 so they can rape the people of their money, and now, before the real crash happens they put them back?  Is that supposed to make us think they are doing their jobs and looking out for us?  

 

 

Thu, 07/11/2013 - 13:36 | 3742042 NoDebt
NoDebt's picture

Don't worry, this is never getting enacted.

And also don't worry, they still aren't looking out for you.

Situation normal.

Thu, 07/11/2013 - 13:03 | 3741964 digitlman
digitlman's picture

I don't see anything about hard leverage limit numbers in here.  Until then, FAIL.

Thu, 07/11/2013 - 13:05 | 3741973 firstdivision
firstdivision's picture

If you want to see something hard and leveraged, try something from Peter North Productions.

Thu, 07/11/2013 - 13:47 | 3742078 Crtrvlt
Crtrvlt's picture

they can leverage all they want just no bailouts ever again (via tarp and the significantly bigger one and counting via the FED).  that should be inserted in there 

 

Thu, 07/11/2013 - 16:11 | 3742648 OneTinSoldier66
OneTinSoldier66's picture

Only the free market can actually deliver that. Not some politicians scribble on a peice of paper.

Thu, 07/11/2013 - 13:06 | 3741969 firstdivision
firstdivision's picture

Either go back to the original Glass-Steagall, or stop the fucking bailout of banks.  Let the market be free, or choke the life out of it.

Thu, 07/11/2013 - 13:05 | 3741974 Henry Hub
Henry Hub's picture

You have to love Elizabeth Warren. She's still tilting at windmills trying to take on the TBTF banksters. Hopeless, but we have to applaud the effort.

As for McCain, he's gotten so senile that he's forgotten who's giving him his bribes.

Thu, 07/11/2013 - 13:46 | 3742065 RockyRacoon
RockyRacoon's picture

I would have to agree. Since Dr. Paul has left, we are not represented by anyone who is willing to confront the thieves during hearings except for Warren.  She is outnumbered by the other Congress members who are either on the take or just plain clueless.  Hence, her effectiveness is limited, just as Dr. Paul's was.  You can expect Fox News to pillory her just as they did Ron Paul.

Note: My down arrows will come from depicting Fox in a negative light, regardless of any truth concerning Ms. Warren.  That's just the way things are.

Thu, 07/11/2013 - 14:44 | 3742303 Northeaster
Northeaster's picture

I think Rep. Alan Grayson is pretty sharp in all things Fed/Economics, unlike Warren & Paul, it is his background & was arguably fairly successful at it.

Thu, 07/11/2013 - 15:03 | 3742381 RockyRacoon
RockyRacoon's picture

Grayson is well intended, but his grandstanding overshadows his message.  If he would just be straightforward and leave the smirking aside he could be more effective.

Thu, 07/11/2013 - 13:07 | 3741978 YHC-FTSE
YHC-FTSE's picture

Even the banks' whores can smell the farts of change before the shit hits the proverbial fan. I suspect they're trying to protect their current accounts.  

Btw, why the hell isn't McCain in jail for financing terrorism?  Our own gay zionist, Hague should be his cell mate at Gitmo.

Thu, 07/11/2013 - 13:07 | 3741982 cro_maat
cro_maat's picture

Is this the same McCain who was just smoking Havanas with AlCIAda in Syria last month? I guess he wants to make sure our banks are safe to launder ME terrorist $.

Thu, 07/11/2013 - 13:19 | 3741991 ebworthen
ebworthen's picture

If they wanted something better for us they would not have repealed the original.

This is like "New Coke" for U.S. citizens (a lie that leaves a bad aftertaste).

http://en.wikipedia.org/wiki/New_Coke

Thu, 07/11/2013 - 13:18 | 3741999 wcvarones
wcvarones's picture

Well at least the grumpy old First-Amendment-hating warmonger McVain is finally on the right side of something.

Thu, 07/11/2013 - 13:28 | 3742019 ezcearhoc
ezcearhoc's picture

To summarize's ZH commentary here: any attempt to corral crime or enact any reasonable legislation is completely impossible. Give up on civilization, society, and revert to trogloditism.

Remember that Tyler Durden attempts suicide at the end of the movie.

Thu, 07/11/2013 - 13:42 | 3742060 NoDebt
NoDebt's picture

True, but we prefer to focus more on the POSITIVE aspect of the movie.  The one where we get together and beat the shit out of eachother bare-knuckles just cause we fucking feel like doing it.

"any attempt to corral crime or enact any reasonable legislation is completely impossible."

You got it.  Exactly.  Welcome to the board, friend!

 

Thu, 07/11/2013 - 13:47 | 3742079 Alpha Monkey
Alpha Monkey's picture

And in the book, the main character (not the alter ego Tyler Durden) ends up in an insane asylum.

Thu, 07/11/2013 - 13:27 | 3742023 Missiondweller
Missiondweller's picture

I know we'repretty jaded here, but let's at least support the effort.

 

Isn't this what most of us believe MuST be done to restore some sanity to our broken markets?

Thu, 07/11/2013 - 13:48 | 3742086 RockyRacoon
RockyRacoon's picture

Not having read the legislation as drafted yet, I'll reserve judgement.  But in general, you are right.

Thu, 07/11/2013 - 14:46 | 3742309 Dr. Engali
Dr. Engali's picture

There is nothing that can restore tha sanity to these broken markets at this point. The best we can hope for is a major reset. I'm sure that they will manage to turn what was 40 pages into 2500 pages.

Thu, 07/11/2013 - 15:13 | 3742406 RockyRacoon
RockyRacoon's picture

Obviously you didn't look at the Act.  It's 30 pages:

http://www.warren.senate.gov/files/documents/21stCenturyGlassSteagall.pdf

Glass-Steagall was only part (4 sections) of the main Banking Act of 1933, so one cannot equate the two (three?) when comparing the length/size of the various objects of discussion.

Thu, 07/11/2013 - 13:35 | 3742038 Debeachesand Je...
Debeachesand Jerseyshores's picture

First,those four dickheads can go fuck themselves.

There,i got that off my chest.

Since the Glass-Steagall Bill serve the country so well for over 60+yrs,why did those DickHeads repeal those provisions that resulted in the Great Recession and the coming of another Great Depression...... 

Greedy Bastards

Here is a original idea,just restore those provisions,that shouldn't be to hard since the original Bill was less than 40 pages.

Thu, 07/11/2013 - 13:51 | 3742045 Future Jim
Future Jim's picture

Is Glass-Steagall really that important?

By now, many of us know that Glass-Steagall forbade the comingling of depositors' capital with investment capital, and thus deposit institutions can now invest deposits far more foolishly than would have been allowed under Glass-Steagall, but:

  1. Did deposit institutions actually and significantly begin to comingle depositors' capital with investment capital? This economist says that’s not what happened.
  2. Would it have been necessary for deposit institutions to comingle depositors' capital with investment capital in order to cause the personal harm we have experienced thus far? I think not.

Consider that Glass-Steagall would not have prevented:

  1. ending the gold standard (money out of thin air now).
  2. ridiculously fractional reserve banking (infinite money out of thin air), which made infinite money available to loan to subprime borrowers.
  3. perpetual inflation.
  4. excessive government spending.
  5. excessive government debt.
  6. artificially low interest rates, which cause many problems, such as making subprime loans seem artificially attractive.
  7. government discouraging success, such as innovation, by taxing profit and income
  8. government giving money and advantages to it’s friends at the expense of everyone else – especially at the expense of those competing with their friends. This is known as Crony Capitalism.
  9. government using Fannie May, Freddie Mac, and a variety of punishments and rewards to force banks to increase the number of subprime loans to those poor or minority individuals less likely to repay.
    • This was done as part of The Community Reinvestment Act and similar programs created and expanded under Bill Clinton.
    • Barack Obama was training ACORN volunteers to bully banks and employees of banks to give more of these loans.
  10. subprime CDO's (bundles of subprime mortgages) being rated AAA.
  11. banks investing in AAA rated subprime CDO's.
  12. Fannie Mae and Freddie Mac investing in AAA rated subprime CDO's.
    • Government institutions Fannie Mae and Freddie Mac started buying an unlimited number of subprime CDO’s.
    • Their willingness to buy all subprime CDO’s removed all risk from lenders who were then willing to loan multiple mortgages to all individuals.
    • Lenders knew they could quickly sell those loans to those institutions bundling them into CDO’s, who knew they could be sold to Fannie Mae and Freddie Mac.
    • This explosion in subprime lending covered up the idiocy of the CRA and similar programs.
  13. the Democrats blocking President Bush when he tried to limit the number of subprime CDO’s Fannie and Freddie could buy.
  14. people taking loans they knew they couldn’t pay back (liar loans).
  15. the government borrowing money from our kids and giving it to Fannie Mae and Freddie Mac so they could buy all the remaining subprime CDO’s that were in the pipeline on their way to Fannie and Freddie  when the crash occurred.
  16. fractional reserves, low interest rates, and government spending creating pressure on money managers to take bigger risks for shorter term gains.
  17. the regulatory switch from forcing mark-to-model to forcing mark-to-market, which precipitated the crash of 2008. Mark-to-market was suspended by Obama in March 2009.
  18. Obama’s future Treasury Secretary (Tim Geithner) deciding to crash Lehman weeks before Obama’s election, which was an “October Surprise” ensuring Obama’s victory.
  19. the government paying hundreds of billions to reward (bailout) all those who purchased credit default swaps (CDS’s) – many of whom were foreign banks.
  20. trillions of dollars in Quantitative Easing, which is where the Federal Reserve creates money out of thin air and loans it to the government.
  21. suppression of all of this by the progressive media

This is a complex issue, so I am eager to get any feedback from others.

Thu, 07/11/2013 - 18:19 | 3743108 Ghordius
Ghordius's picture

the entities previously known as "Investment Banks" before Glass-Steagall were small. and could fail. Now they are "systemically relevant". aka TBTF

a different way to tackle the issue would be the old anti-trust venue, and limit banks in a salvageable size

size. it's a lot about size. and derivatives. and political campaign donations

oh, and by now near unlimited near-free credit

Thu, 07/11/2013 - 21:16 | 3743594 jmc8888
jmc8888's picture

No they DID commingle the funds.  They are the backstop for the 1.4 quadrillion in derivatives.  Those tank, deposits go bye bye.   Now with Dodd-Frank they can be called for any purpose Cyprus style, even to service foreign subsidiaries.   Glass-Steagall neuters Dodd-Frank.  Those memes in that article are hilarious and flat out wrong.

You're forgetting so many of your points only happened because of the repeal of Glass-Steagall.  I'd say all of your points are touched by Glass-Steagall in one way or the other. Most were only possible because it was repealed.  Some of your other points are biased from the viewpoint of an monetarist, in your case, not Keynesian, but what appears to be Austrian and are clouded by the fog of today's surreal reality.

Why do you think they had to even do a bailout?  Because without Glass-Steagall, everyone's personal and commercial deposits were at risk.   Directly or via counterparty.

With Glass-Steagall they could have let the entire 2008 house of cards collapse, and your deposits would have been safe.  No doubt the TBTF's said, you let us go down, and you'll need to spend trillions anyway to meet FDIC commitments.

Glass-Steagall wipes away pretty much everything that has been breaking our markets for decades as well as the sword of Damocles hovering over us.  The original Glass-Steagall version.  Which is what we need.   

When they weakened Glass-Steagall, economic troubles ensued.  Weakening of Glass-Steagall gave us the S&L crisis.  Without Glass-Stegall all we have left is THE PUMP AND DUMP. Glass-Steagall helps remove the keys to serial bubble blowing. 

There is no need to print to the moon, if there is Glass-Steagall.  Everything the Austrians warn us about start to come about with the lack of Glass-Steagall.   Austrians warn us of problems with this or that, but to actually have those come to fruition you need a catalyst.  The innovations that occurred after Glass-Steagall was either weakened or repealed, give you that catalyst.   Austrians and Keynesian theory are fatally flawed because they are rooted in monetarism.

All monetary theories are full of shit.  Because money ain't wealth.  Gold isn't even wealth.  These are just units of accounts.  Wealth is having the means at your fingertips to provide for your needs.   So creating the Erie canal, allowing for trade to flourish, that is wealth.  Panama canal.  That is wealth.  The Salt River Project which allowed Phoenix to grow, that is wealth.  Transcontinental railroads.  Apollo program. Wealth is the result of what you do that increases your power over the universe which allows you to create what you need. 

All humans can do is try to accumulate those units of account so they can tap the vast wealth creating mechanisms for the products or services they need or want.  But no piece of paper or metal, is wealth. You can't eat gold or paper. 

Don't confuse wealth, with something that psychologically holds a store of value.  You must separate the two, because they are two different things entirely.  

There is no reason you can't try to hold gold for the shit that hits the fan moment, but that won't make you wealthy if the shit hits the fan.  You still will have a hard time getting fresh water.  Or electricity.  Or food. Or toilet paper.  Because only having the power to accomplish those tasks is wealth.    Gold is backup...it isn't a PLAN.  It isn't salvation.  

Its price fluctuates with the amount of printed money that has no real value attached to it.  It's because of derivatives, and bailouts, imperial/drug wars, and all the 'security' spending surrounding them.  The repeal of Glass-Steagall aided or outright allowed these to occur.   

Think of it this way.  How bad is a 6 pack of beer for you, if you don't have a bottle opener?  The repeal of Glass-Stegall was the bottle opener.

Thus you got a situation where all these frauds, imbalances, blackmail, and bailouts happened. 

Derivatives cannot exist in today's form with a Glass-Steagall.  It's not just deposits are tied, it's the INSURANCE and DEPOSITS when under the umbrella of the speculative arms that created the derivatives monster.  You simply cannot have anywhere near 1.4 quadrillion in derivatives with Glass-Steagall (and being enforced).  Maybe a few billion, by the actual people needing it.  Like Southwest Airlines ACTUALLY trying to mitigate fuel cost fluctuations for actual jet fuel they want to take delivery. 

We also forget that when derivatives are crowding everything and making each market, along with HFT, it forces everyone else to increase their debt level in order to get a return on anything.  So excess debt is a function of excess derivatives. Because the derivatives are crowding out every one else's legitimate capital.  It mutes the signals of capital.  Derivatives are fictitious claims.

Let's take that jet fuel example again.  The lack of Glass-Steagall enabled speculative firms to gamble millions of contracts in total on Jet fuel, while all the actual users of jet fuel numbered a few thousand.  So just like HFT, what is market discovery based on supply and demand when derivatives are like HFT creating fake quotes that are pulled. 

Derivatives influence interest rates.   They helped get many of the countries to look good on paper to enter the Euro.  They've screwed countless municipalities.  Did you know that about 1/6 to 1/10 of the hospitals in the U.S. actually have derivatives contracts?  It's insane.  Skyrocketing health care is in part a function of derivatives.  Derivatives fueled $150 oil. 

Fannie and Freddie wouldn't need to be propped up with Glass-Steagall in place.  Freddie and Fannie affect derivatives.  Volatility affects derivatives.  Fannie and Freddie grew so big because Wall Street wanted it.  They sold their story to congress and congress thought it was a good enough line to run with.    Both at fault, but the initiators and benefits were clearly one sided. 

Look overall we have more problems than just Glass-Steagall, but the signals of what and where to invest by individual, by group, by gov't are fucked without it.  We still have many other issues, but Glass-Steagall influenced most if not all of them and the lack of it exacerbated the problems we have experienced and we continue to be open for the upcoming fatal blow.

We still need fusion.  We still need to develop more fresh water.  We still need to invest in space exploration.  We still have to clamp down on HFT.  We still have imperial wars of conquest. Various fascist ideologies.  But without Glass-Steagall the signals are fucked and everything flows to either participate in the scams or to hedge against them...like excess reserves.

Inflation isn't a big deal.  It depends on the trade off.  A stable low inflation rate in return for progress is fine.  Don't let the perfect be the enemy of the good. But we don't have low inflation, we have a claim of low inflation.  Different things.  An actual 2-3 percent inflation per year is manageable.  Meanwhile if you look around everything is up 200-400 percent in price in the last 10-12 years, and everything is degrading.  Not 20-30 percent and mankind's power has grown.

All forms of monetarism are bullshit.  Not just Keynesianism.  America wasn't founded as a monetarist nation, and didn't become one until London's wall street bankers took charge when Andrew Jackson closed down the National Bank.    Only for a few brief moments since then have we partially broken free of their monetarist crap.   1828 was a London monetarist coup.  1913 was merely the next step of a process already well underway.

Glass-Steagall is just but a first step.  It gets rid of the cancer.  It takes all our personal and commercial deposits out of hock.   It makes it impossible for derivatives to corner any market, instead of its size competing with or alongside the speed of HFT.  It allows markets to clear.  

You cannot have price discovery without Glass-Steagall.   Oh you can, but it would immediately virtually zero everything and drag everyone not involved in the bets to pay along with those that did.   Glass-Steagall controls the collapse.  Allowing the markets to clear at this point without Glass-Steagall would result in utter panic and not accomplish a damn thing except a breakdown crisis. 

You get rid of the fictitious crap, while keeping the real. Real debts are honored.  Fake debts go somewhere else and influence the markets as much as those arising from a game of monopoly.  So there would still be the TBTF entities, just without all their scams.

When it comes to how money is created and regulated, congress and a national bank are the entities.  Not wall street TBTF's and the federal reserve.   Which is really a den of vipers and thieves? Money out of thin air for derivatives and 300x leverage or for funding wealth creating projects that expand mankind's power over the universe? 

A National bank doesn't need to sit on trillions of reserves.  It creates the credit for projects to be undertaken as needed and as warranted.  But the threshold is high.  That's the key.  For all normal personal or commercial loans you use a private bank.

Thus you aren't using National bank credit creation to feed a housing bubble.  You are using a National bank for research and development.  For machine tools.  For mag lev.  For fusion.  For space. For water projects.  It's easy to know the difference between these and Joe's Auto part store who might be a friend of someone inside the bank.  It's up to us to police it, but that's a lot easier, with far less reaching negative impact then what the private foreign bankers have brought us.

Glass-Steagall is just one part, but an important part.  It is THE first step.  The American Credit System (not monetary) is what we need to return to.  Hamilton had it correct.  Together these two steps basically touch everything you mention.  

Now when it comes to this legislation, I'll await more details.  The original version of Glass-Steagall is what is needed.  A few new lines could be added, but for now I am wary of anything called '21st century version', because generally such names that means they want to attempt to legalize some of the worthless 'innovations'. 

McCain has been a past supporter of some of the Glass-Steagall bills.  He waffled over the recent past, and now is back for at least this version obviously.  He still is a scum bag.  He still backs a lot of fascist crap. 

But also don't forget that there are multiple Glass-Steagall of some sort bills out there, and have been for the last few congresses.  Some have dozens of co-sponsors.  H.R 129 is legit at this point.

I agree with ZH commentary that the push to neuter it will be there.  You have to keep fighting it.  Keep pushing for it.  The TBTF's are scared as characterized by sending a couple dozen lawyers to the Delaware state senate trying to influence a non-binding bill asking Congress to enact Glass-Steagall in recent weeks. 

You don't get excited until it is passed and implemented.

The TBTF's know the jig is up when a true Glass-Steagall is passed.  The closer we get to passing it, the more their fangs will grow.  Each day that passes more and more people and memebers of congress understand its importance.  Because it touches everything.  From AIG to S&L to Cyprus to DotCom to the Housing Bubbles. 

I hope you get the idea, but I know even now I did a piss poor job at explaining it. 

Glass-Steagall

 

Thu, 07/11/2013 - 23:01 | 3743879 Future Jim
Future Jim's picture

Thanks. You made a lot of points but you didn't really explain HOW Glass-Steagall prevents all the bad stuff except that you did mention that it lets the TBTF's claim that if they go down, they will take the depositors with them, and I agree, but if the Congress is going to take unconstitutional action, then couldn't they have just said no to that - or - couldn't they have just paid the bailouts directly to the depositors?

If it protects our deposits by keeping them out of risky institutions, then couldn't we depositors just move our deposits to less risky institutions? For example, I use a credit union. BTW, were you warning us to pull our deposits out of these institutions before 2008?

Fri, 07/12/2013 - 02:02 | 3744159 jmc8888
jmc8888's picture

Speculative arms engages in speculation they otherwise would not be able to (not to mention the sheer market moving/destroying size) because the Insurers and Deposits are all under the same roof.  It games the system.  It's like giving a kid their parents wallet and credit cards in Toys R US. It's artificial and the structure sets the scenario up.

You see before Glass-Steagall was repealed if someone would want to do anything of the sort, they would have to use their own capital and/or convince a completely different company with completely different goals that it was a good deal.

The insurance company would say up yours, we're the ones that stand to lose most while you benefit.  This separation kept derivatives small even with Glass-Steagall's weakening.  There is no incentive for insurers to risk THEIR money for the gain of a private equity firm.  Last I checked I'm not going to risk my nuts on your sexual endeavors right?  We're two different people. 

But together these entities creates a monster, and with other monsters (other TBTF or Inter Alpha group of banks) they create the great derivatives chains, but worse, not with their capital, but with all capital under their roof.  

Suddenly you can have one section cover for the other because both are under the same roof.

So the repeal of Glass-Steagall allowed every day deposits to be used as collateral for these purposes.  So let's just use some generic numbers.  Instead of say a generic private equity firm having $1 billion of their own money to risk, they now had access to customers deposits and it rose to $10 or 100 billion or 1 trillion.  Then on top of that place all the leverage, which some is hundreds of times, and you see what happens is that the entire scale of derivatives ONLY changed because Glass-Steagall was repealed. So again, not only did they gain the actual capital, but the leverage they could create on top of it.  This is not natural.  It simply isn't legitimate.

Even if you had mergers of regular banks and it amounted to a regular bank with 1 trillion, you would never have the risk of 300 trillion in various interest rate swaps, FX, CDO's, squared, cubed, etc. 

What we've seen since Glass-Steagall is the money banks have move away from the physical economy and into the scam non-economy.  Since the bailouts started it's only gotten worse.

That not only did the scale change so mightily it also did so by risking customers deposits.  But not just that, but everything under the umbrella, which include the assets of insurance operations.  So it's actually not just deposits at risk, but every bit of insurance any of these assholes put out. 

It was like plopping a cocaine addict down inside a Columbian warehouse, and allowing him to feel the high while someone else felt the pain of withdrawal or overdose. 

Part of the problem with Wall Street is that people actually think it needs to exist.  A market exists when two people want to trade.  You don't need a specific place or specific entities to be involved to say you then have a market.   But we live in a world where people think Wall Street adds something, when it doesn't.  The aura creates an atmosphere for corruption.

By it's very nature it only adds to operational costs,  but of course there is a cost to bringing things to market.  So you expect some leakage or cost.  The squid siphoning off with scams only pretends to be a part of it, but most people don't understand the scams or see the sleight of hand.  Many people see what they are doing as legitimate and adding value.  Now remember that when the crisis hits.  Because that's the default viewpoint of Wall Street.  Even if some are crooks, that somehow most are adding value and needed.

I agree what they did in 2008 was wholly unconstitutional, but also dumb.  They should of made them eat it.  But I can understand the faulty logic that went on, and it only happens if they are in on it, dumb, or both.  The faulty logic would be as follows.

Well....if you're going to have to pony up trillions anyway......you might as well save the banking sector too.  You'll be remembered for having the banking system collapse under your watch. Millions will lose their jobs and in the end and you'll still need to create trillions.  But here you could get off easy with less and save the banks.  Republicans don't have to worry about authorizing those trillions and democrats won't have their angry middle class people storming their offices about lost or frozen deposits.  Little did most of them know they didn't fix anything.  Remember most simply thought there were some bad mortgages and that's it.

Most didn't realize the only reason millions of jobs were at risk only because it was the deposits of people (who spend) and commercial deposits (businesses who spend) which if lost created such a situation.  That it was only like that because of the repeal of Glass-Steagall.  In life, many situations are controlled by clever phrases and other manipulation or basically; sophistry.  It made a good story.  Sounds logical.

Why save one when you can save both!  It played on the ignorance of those who didn't understand the situation. 

With Glass-Steagall there wouldn't be a cliff to jump off from.

You see at that time the correct way would have been immediate implementation of Glass-Steagall to separate the deposits from the collapsing derivatives.  Then they wouldn't of had to pay shit.  You could separate real assets and debts from them.  So the deposits and real insurance policies could be separated, and from there divided into two entities a bank and an insurer.   The investment banking arm would then be on the hook for the rest.  In other words, bankrupt.

All real economic activity would be fine.  Just the fake shit would be gone. 

Oh and knowing how much various derivatives contracts have been fucking over municipalities and businesses, many would of reduced their obligations.  Various Hospitals.  The city of Detroit.  Who knows how far it reaches or how much relief off the physical economy could have been made.

Originally, Glass-Steagall was enacted AFTER there were major bank failures and bank runs that resulted in even more to fail all without FDIC insurance.  When these banks went under, you were fucked.  My family's story had my grandfather pulling the bank head out of the bar to reopen the bank when he heard of bank closing's back east.  Back then it took time to close banks across the country.  The bank head cussed him out and pointed to the sign that they've been around since...1880 something.   But he got his money (and his dad's) and my family didn't lose out.  But they acted fast.  So while others were recovering from losing everything, my dad grew up with new refrigerators and the like...and much, much more.

People remember Glass-Steagall and FDIC in the context of great depression, but don't realize the destruction that happened before these were put into place and all the scams running that led up to it along with similar deals around the world as why the great depression occurred.  They forget the WWI debt Germany owed, and how integral Germany was to trade at that time. 

Would the markets have tanked if we enacted Glass-Steagall in 2008? Sure.  Because a few of the investment arms would of had to sell and then exit from the market.   But they tanked anyways.  It's artificially high anyways.  

No need for bailouts, because all the worthless crap was zeored.  This deflation would also have lowered prices paid on commodities, which would have then filtered through the real economy. 

Derivatives and the fake inflation they pushed through fake demand, is like a tax that benefits no one.  Everyone pays more, no one knows why, just someone made a skim off the moves. This would be removed, so the actual price of oil would reflect real supply and demand.  True we have other situations like China hoarding copper and the like, but it's a far different beast then derivatives.  

In 2008, and even now, we have FDIC, and so far the bank runs haven't happened.  On this note re-enacting Glass-Steagall prevents much of the deposit destruction that happened during the great depression. Now if we waited until say after Chase or BofA went down, maybe both, and no FDIC was paid out, then maybe we'd see the sort of average destitution we saw in the great depression.  But of course we have food stamps, so we wouldn't be necessarily seeing bread lines as often.  Sort of at least. 

Having people move deposits will create a banking crash and run.  The best way is to remove the claims against the deposits.  Because the claims are fictitious.  Also since TBTF's are intertwined with commercial business and smaller bankers it can bankrupt many non TBTF's as well. Each person should move their funds to as safe a place as possible.  Overall though gov't has the ability to remove the risk from the deposits. 

Until then, I believe a credit union, generically speaking, is probably the best type of institution to be in.

So we didn't need to pay bailouts to companies or give it to depositors.  All we needed to do was separate the legitimate assets and legitimate debt from the fictitious.  That's the way to of said no, and people were saying to pass Glass-Steagall immediately.  People were saying to pass it beforehand.

Banks aren't supposed to be risky.  That's what investment bankers and individuals that want to engage in risk for the potential reward do.  Instead we allowed some to throw everyone in the pot, allowed a few to benefit. When it failed, it was either save us all or let us all fail.  But that was a scam.

I'm just a regular person.  I knew of the Glass-Steagall act in rudimentary form in grade school in the 80's.  In the mid-nineties I even remember my senior year gov't teacher talk about how it was being whittled away and the drive was on to repeal it.  He even said the various wall street branches would get together and do much of the same bullshit they did in the 20's and that within a decade of its repeal we'd be in another depression. 

Plus I've always kept my ear to the ground about many issues.  A few of the people that ZH posts articles from are people I had to pleasure to listen or read from time to time since the late 90's and/or early 2000's. 

My early college years had me skeptical of the dot com bubble.  I was seeing all these multi billion dollar companies that had sky high valuations and were making no money.  Crap.com with almost no income is worth as much as IBM? Yeah fucking right.  My friend was the opposite and just kept believing all the bs and how his dad made this much or that much.  I tried to warn him to get his dad to be careful.  He lost a shit ton to dot com.

I tried to get my dad to invest in oil and gold, instead he tried to start a business he knew nothing about. 

I was hearing all sorts of information about all the various bubbles.  I was shaking my head at all the morons flipping houses.  I knew we were in big trouble and knew the derivatives were blowing up huge years before most.   I spent alot of time in college, but I'd get off, go to a bar, and talk with a real estate guy.  I always mentioned to him about the bubble and what he thought.  He didn't see a damn thing.  I tried to mention the subprime, the massive valuation increases, but he didn't see it.  That was 2005-06 timeframe. 

I finally graduated in 06 and I was sure a crash was coming soon.  The mortgages. The derivatives.  The war debts.  I was actually surprised they kept it going to 2008.

So to answer your question, I may not know everything, but I have been skeptical and didn't buy into the bullshit this whole time.  At this point I can't remember which banks I was skeptical of, other than those known for engaging in derivatives, now known as TBTF's.  Yes, generally I've seen it all coming from a mile away.  Did I know exact particulars like some Nostradamus, no.  I wasn't a creator of the knowledge. I understood the interplay and was an early adopter of the rationales. 

 

 

Thu, 07/11/2013 - 13:47 | 3742083 CharliePrince
CharliePrince's picture

you dont need G-S.    theres no more law anyway..

Thu, 07/11/2013 - 13:51 | 3742100 Alpha Monkey
Alpha Monkey's picture

Probably gonna blame new regulation for the impending crash keep the muppets heads spinning for a another decade or so.

Thu, 07/11/2013 - 13:53 | 3742109 Alpha Monkey
Alpha Monkey's picture

I like how they continue to reiterate, "this will not end too big to fail"...

Thu, 07/11/2013 - 14:00 | 3742127 Future Jim
Future Jim's picture

"The original Glass-Steagall legislation was introduced in response to the financial crash of 1929 ..."

This seems like a strike against Glass-Steagall. Wasn't the net effect of the responses to the crash of 1929 to turn that crash into the Great Depression?

Thu, 07/11/2013 - 21:25 | 3743613 jmc8888
jmc8888's picture

Nope.

I understand you might have heard otherwise.  This is a case where seems is different then reality.

 

Thu, 07/11/2013 - 14:31 | 3742181 shovelhead
shovelhead's picture

Guess this will be a cold shower to the hot and bothered types who thought Jokahontas was going to strike fear in the banksters ranks and save the day for Everyman.

She's just another whore to sell her name on a bankster written placebo bill.

Lovely stuff for the soundbite crowd to lap up but this stinker is a mackerel in the moonlight that even if it survived the Capitol meatgrinder would do little to address the total failure and lawlessness of the banking industry.

Thu, 07/11/2013 - 14:26 | 3742237 MeelionDollerBogus
MeelionDollerBogus's picture

No one even needs a law for this.

Banking customers simply need to demand a higher rate of return on their accounts, including checking accounts at risk, to be worth keeping an account at all.

Store cash & coin otherwise (obviously I vote gold & silver but the common sheep will not).

Of course once bank accounts are forced to have a high rate of return to match the risk involved, then bonds will not be able to function at all with lower rates, hence, a real free market pricing in real risk without fraud & government intervention would mean...

Ya, we all know how that story goes.

Thu, 07/11/2013 - 14:46 | 3742313 Catullus
Catullus's picture

What? Hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha.

Oh man. This is rich. The same John McCain who didn't bring this up in 2008 when he was running for president and saying how we needed to do the right thing and bail out the banks. The guy is a tremendous fucking loser.

And E Warren? Give me a break. She's clueless. Liberals get a boner for her because she was a Cherokee law professor at Harvard who claimed people were victimized by predatory lending. Please run for president someday so the crunchiest of the crunchy comes out to support you.

Why not get rid of the FDIC so you guarantee "we, the taxpayer" don't get stUck with the bill from depositories do this as well? It's not the risk taking that's the fault. It's the taking risks WITH OTHER PEOPLE'S MONEY!!!!

Thu, 07/11/2013 - 16:01 | 3742615 robnume
robnume's picture

We have a "civilisation" here? Where? I need to find one.

Thu, 07/11/2013 - 16:19 | 3742676 Cheduba
Cheduba's picture

Oh, John McCain, you're so heroic!  You must have been studying at the library every night in the past five years since admitting you knew absolutely nothing about the economy during the 2008 elections.

You just keep on deluding yourself into hoping that we'll forgive you for being such a globalist piece of sh*t by cheerleading WWIII so fervently.

Thu, 07/11/2013 - 16:44 | 3742778 BattlegroundEur...
BattlegroundEurope2011's picture

Gramm-Leach-Bliley still alive??

 

Thu, 07/11/2013 - 20:56 | 3743543 Andre
Andre's picture

Here's an idea.

Take the original Glass-Steagall Act, word for word, and pass it again.

Never happen, though. Too simple and easy to understand, plus it has a lot of case law backing it up.

Thu, 07/11/2013 - 21:39 | 3743649 alamoillini
alamoillini's picture

as posted earlier, why cannot these legislators stop stroking there ego and repeal Gramm-Biley and restore Glass- Steagall....layering new legislation is just make work for the professional politicos.....repeal Gramm-Biley, restore Glass-Stegall, repeal Fed Reserve dual mandate, restore orginal Fed mandate as the "bankers bank", repeal executive order of Nixon removing USD from gold standard, restore gold standard, repeal Fed open market operations and control of the USD, restore USD control to US Treasury with gold standard

 

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