Can you begin to imagine how bad the banking situation really is? Sanford Weill, likely the biggest player in accomplishing a repeal of the Glass-Steagall Act, is volunteering that it is time to break up the big banks. This is the guy who somehow convinced an otherwise smart President Clinton to allow the biggest banks to merge commercial lending with mergers and acquisitions and dangerous bets using clients’ money.
This would be almost as big an announcement as the Tea Party switching its allegiance to support President Obama. Not as big a sea change perhaps, but certainly more important. Why would Weill and his cohorts have felt so strongly about negating a law that had protected Americans since 1933? Greed.
Recall that the Citigroup deal was in violation of a Depression-era Glass-Steagall Act, which separated insurance companies, commercial banks and investment firms. That didn’t stop Weill and his henchmen. With some help from Fed chairman Alan Greenspan, Weill and John Reed joined forces to form the behemoth Citigroup in 1998.
Weill and others had already made some headway in lobbying against Glass-Steagall, and the Fed gave them the space to operate legally for two years to see whether Congress would tear down the law completely. In that time, he lobbied hard, and won. By 2000, Bill Clinton had signed the Financial Services Modernization Act, the death knell of Glass Steagall. Within several years–a moment in time to the banksters– the repeal of Glass Steagall was widely considered a major cause of the 2008 financial collapse.
Robert Sheer has written, The men most responsible for the collapse of the American dream are heaped with honors at the highest levels of society. Might that possibly be a-changin’?
Turn to the summer of 2012. Weill has figured out that his cronies are corrupt colluders (see LIBOR scandal below). Weill realizes that it was the end of Glass-Steagall that compromised the international banking system, that banks need enjoy the trust of depositors to survive. Losing their trust will ultimately mean the demise of the banking system. Weill, a very smart-very stupid man, who put us all at risk so his bankster playmates could dance the hustle with other people’s money and without, apparently any personal consequences for failing the public, has broken from the ranks. He has taken a strong stand that there is an absolute need to separate deposit/savings operations from risky investment operations:
I am suggesting that [big banks] be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk, the leverage of the banks will be something reasonable… I want us to be a leader… I think the world changes and the world we live in now is different from the world we lived in ten years ago.
Why the about face? Why is the Wall Street hustler who led the successful lobbying to reverse the Glass-Steagall law doing an about face? It’s scary that Weill, the culprit who made deregulation his raison d’etre, suddenly understands the devil made him do it. Imagine how shaky the banking industry must be, how vulnerable the economy is, that Weill would do a 180-degree mea culpa. Weill is saying that the Volcker Rule is insufficient to curb the voracious appetite for profit of the world’s biggest banks. In brief, the Volcker Rule, part of the watered-down Dodd-Frank Act passed by Congress, would prohibit proprietary trading of securities, derivatives and certain other financial instruments by banks, would ban these banks from owning or sponsoring hedge funds, would impose stricter record-keeping and reporting. It would prohibit banking entities from engaging in proprietary trading.
Why would? Because Congress continues to negotiate the fine points of the Dodd-Frank Act and Volcker Rule. Mean-weill, Nero fiddles while Rome burns. Sanford Weill could re-emerge to force real change in banking structure. Wouldn’t that be something? Just imagine how bad things–things all but the most sophisticated economists and bankers cannot understand–must be for Weill to state, front and center, without equivocation, that banks and stocks don’t mix.
The Republicans are running on a political agenda that it is all about economics issues. Democrats need to run a parallel track. The difference is that the GOP regressive track is taking us backwards, protecting vested interests. The Democrat progressive track is heading forward to a more fair and responsible way to run and finance a country, its government, its people–all people–uber-wealthy, super-rich, moderately rich, middle class, and poor.
At the center, is what capitalism is about: a social system based on the principle of individual rights. Not just corporate rights, venture capitalist rights, bankers rights, gamblers rights. Individual rights.
The LIBOR scandal is the perfect example of how those who own and control virtually all world’s wealth aim to maintain such advantage while increasing it at the expense of human rights. Hundreds of trillions of dollars are influenced daily by the LIBOR rate (that’s not a typo). Mortgage rates, credit card rates, rate rates, rate rate rates, rate rate rate rates, . . . you name it. And the big banks have for the past several years colluded to manipulate the rates to which they borrow from and lend to one another. To think that a sufficiently well-funded Consumer Finance Protection Board together with a new Glass-Steagall Act save the country, the world from the banksters and the politicians they own?
LIBOR has not been in the headlines in recent days. But do not think this scandal, scandal of scandals, is going to go away. It is, for now, merely percolating. If you think the London Olympics is getting attention, just wait until the London Inter Bank Offered Rate resurfaces. The key word will be offered–that is how the big banks operate, manipulating the entire economic system for its selfish advantage. They offer to rig the rates to their advantage. Barclays might have been the first bankster operation to have been exposed but it most certainly will not be the last. This is big. Hundreds of trillions of dollars big.
There may even be the chance that the British will mete out real punishment to the banksters who are found culpable of rigging LIBOR rates. If British banksters and politicians wind up behind bars, might that concept migrate to American shores? Definitely not if Romney is elected–those are his people. Probably not if Obama is re-elected. Hope and change can get you just so far. And Glass-Steagall, convicting LIBOR colluders, and convicting the perpetrators are big. Likely for the most progressive and enlightened president and Congress to take on.
Investment houses have to play without the safety net of government assurances. Jamie Dimon is hiding in the bushes over the recent 8 or 9 billion dollar debacle at JP Morgan Chase. That is chump change compared with what Weill is proposing.
Has Sanford Weill turned into the capitalist whose concern is focused on human rights? So this may very well turn out to be the perfect time for Weill to re-emerge. Is he wearing the emperor’s clothes? This time will he be wearing the white hat? Can his power and influence enable to return as a new sheriff in town? Will he try to make up for the error of his ways?
Wow! This could be big.