Time To Implement Glass-Steagall and Stop Wall Street's Blackmail of Congress

December 13, 2014

Huffington Post writer Robert Creamer launched a mobilization of progressives for Glass-Steagall and against Wall Street early on Dec. 11 with an article entitled, "Stop Congress from Eliminating Dodd-Frank Provision That Prevents Bail Outs of TBTF Banks." Creamer wrote:

"The Financial Modernization Act [that repealed Glass-Steagall] unleashed the explosion of speculation that — in just over a decade — led to the Great Recession.

"My wife, Congresswoman Jan Schakowsky, considers her vote against the repeal of Glass-Steagall one of the proudest votes of her Congressional career. She ranks it right up there with her vote against the Iraq War.

"This is another Glass-Steagall moment."

After writing that Wall Street can be beaten on this, and informing readers that Pelosi is opposing the measure, he said,

"If Democrats stand tall and support Leader Pelosi, they can stop this provision dead in its tracks. But you can't wait to act. The decision will be made today. Call your Members of Congress the moment you finish reading this article. Tell them to vote against the so-called 'Cromnibus' funding bill until the provision that allows for the bail out of big Wall Street banks is excised and sent to the shredder where it belongs."

David Stockman, the former Director of the Office of Management and Budget under President Ronald Reagan, wrote on his SeekingAlpha website on Dec. 11 also blasting the omnibus spending amendment, noting that Dodd-Frank

"and its incomprehensible 1,700 pages of legislative pettifoggery and 10,000 pages of implementing regulations that metastasize by the day" was useless.

"Instead, [congress] should have gone to the root of the problem and passed a Super Glass-Steagall that would have dismembered the giant banks by statutory edict, and kicked the Wall Street-based gambling houses like Citigroup out of the FDIC entirely. The fact is, deposit insurance has been coopted and abused by the Wall Street mega-banks for decades, and now stands as a vast perversion of what had actually been intended — misguided or not — way back in the dark hours of 1934."

In a rare intervention by an FDIC vice-chairman into a legislative vote, Thomas Hoenig put out a statement against the repeal of Section 716 put into the omnibus bill.

"In 2008 we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks. Section 716 of Dodd-Frank is an important step in pushing the trading activity out to where it should be conducted: in the open market, outside of taxpayer-backed commercial banks. It is illogical to repeal the 716 push out requirement."

He adds that these derivatives can go into the banks' affiliated "broker-dealer" entities "which are not as richly subsidized ... which explains these firms' resistance" to the "push out" from FDIC protection.