Opinions of Peter Belmont
Speaking Truth to Power
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A Suggestion to Bernie and Hillary Reviving Glass-Steagall and Anti-Trust |
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by Peter A. Belmont / 2016-03-04
A slightly earlier version of this essay appesared in Counterpunch on March 7, 2016, and on alternet also on March 7, 2016. Glass-Steagall: Preventing A Repeat Of The Crash Of 2008 Because the memory of the world-wide crash of 2008 is still so vivid today, in addition to promising to reestablish the Glass-Steagall legislation (see below), I’d also propose re-establishing all Glass-Steagall’s enforcing regulations as well, and do so immediately, without any long pause for regulatory drafting or much opportunity for interference by banking lobbyists. And, of course, perhaps as an element of anti-trust effort, I’d propose breaking up the big banks so no one of them is any longer “too big to fail”. That’s the beginning of making sure that their CEOs are also not “too big to jail”. Re-establishing Glass-Steagall and breaking up the big banks would, I believe, be better “medicine” to avoid a repeat of 2008 than anything else. Therefore, I suggest that Bernie (and then, I trust, in short order, Hillary) state the following—very simply and very clearly: Promise: If elected I will within 100 days after inauguration send legislation to the Congress which will in effect re-establish the Glass-Steagall Act and legislation as needed to break up the big banks. Promise: If elected I will within 100 days after inauguration send legislation to the Congress which declares that no-one but human beings in America may spend money to affect the political process in America and Congress may place a cumulative annual cap on such spending. And if the courts strike down this legislation, I will propose a Constitutional Amendment to the same effect. What Is Glass-Steagall Anyway? The broad purpose of Glass-Steagall was to separate commercial banks from investment banks and brokerages. The Federal Reserve Banks could lend to commercial banks at low rates (rates which have been about 0% now for a long while) but investment banks and brokerages would have to borrow from “the market” just like all other businesses. No longer would investment banks get an illegitimate boost from their commercial side with its essentially free borrowing. And no longer could bad investments on a bank’s “investment” side threaten the money left with the banks by depositors or borrowed by the banks from the Federal Reserve Banks. The easiest way to re-establish Glass-Steagall would be to repeal the enactments which repealed Glass-Steagall or any of its parts, but to save any enactments (after the Banking Act of 1935) to the extent that they strengthened the public protections of Glass-Steagall. (Sadly, of course, there are many devils in all these details.) The goal of this legislation (perhaps Sen. Warren could help with the drafting.) would be, roughly, the following, aiming to cleanly re-separate commercial from investment banks: • commercial banks are banks that take in deposits and make loans • investment banks are banks that underwrite and deal with securities One year after the proposed legislation goes into effect, no commercial Federal Reserve Member Bank (or any other commercial bank) may: • deal in non-governmental securities for customers • invest in non-investment grade securities for themselves • underwrite or distribute non-governmental securities • own any interest in or affiliate (or share employees) with any company involved in such activities. and • no securities firm or investment bank may take deposits or own any interest in or affiliate or share employees with any commercial bank. and • the regulations made after 1933 and before 1960 shall be re-established, Since I am not a banker I have probably made some mistakes here. But this is the drift. To the extent the legislation aims to make things safe for investors, depositors, and for the economy, it will do well for the public. To the extent the legislation aims, instead, to improve the prospects of any banking concern or brokerage, it will become corrupt—as we saw in 2008. Anti-trust was a good idea when it was established. “No business too big” was the idea. Sadly, this idea has been pretty much abandoned by recent administrations and the law. The idea needs refreshment. Ending “banks too big to fail” would be an excellent place to start. No-one can say America did so badly from 1933-1960. The financialization of the economy has replaced real business with unhelpful and dangerous financial boondoggles. Jobs We need jobs for ordinary people, right here in America, not shipped overseas to Asia. Reforming banking may help, but government spending on necessary work—too long neglected—will be beneficial to the public both for the tangible benefits it provides and also for the jobs it provides. Ask the residents of Flint, or any other old city. Returning manufacturing (and the repair of declining infrastructure) is one way to begin making America a nation of workers rather than a hunting-preserve of predatory bankers. And combating GWCC is another—one which should not wait. (It should not even wait until November.) Combating Global Warming / Climate Change Must Be Part Of The Mix GWCC is the world’s (and America’s) greatest and most necessary and most pressing task today, and no political essay is complete without showing how combating GWCC fits in with its topic. Sadly, the interfering propaganda of fossil-fuel interests has confused the issues of GWCC and made many Americans believe that GWCC is either a hoax or something that can safely be ignored for another generation. Neither is true. Many politicians who believe that GWCC is a real problem nevertheless believe that it is not an urgent problem. This is partly a result of bad education: politicians are not scientists. This is also a result of the "thumb" of politics on the "scale" of official statements about climate, a "thumb" which has tended to downplay both the seriousness and the urgency, the immediacy, of the need for corrective action. Thus, a large educational effort, both for politicians and for the public, will be required to make this urgency clear to America. President Obama can and should work on this immediately. Since I am concerned with American jobs, an important way to begin is to address the world-wide problem of Global Warming / Climate Change by steadily building, as quickly as possible, renewable electric generating capacity and replacing with it all of our current fossil-fueled electric generation capacity—and otherwise ending the use of fossil-fuels, as in transportation (including air and sea transportation), in the military, manufacturing, and building heating. These are big projects and necessary, and will provide jobs for many people for many years. Promise: If elected I will within 100 days after inauguration send legislation to the Congress which provides during the period 2017-2027 for the annual shut-down of 10% of America’s 2016 fossil-fueled electric power generation capacity and the replacement of at least that 10% with renewable electric power generation capacity, some publicly and some privately owned. Back To The Banks But let’s start with the banks. All these projects will require loans. And the big investment banks are too busy with crazy and dangerous financial schemes to do any lending these days. If the replacement of America’s fossil-fueled electric generation facilities is to be done, even in part, by private capital, there will be needed a great deal of banking (lending) in the public interest. So, as I read it, these three elements of a major political program for today, fit together reasonably well. By contrast, any political program which fails to deal with the banks, the oligarchy, and GWCC, will be a recipe for continuing disaster. |
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