Wall Street Still Runs America

And is running it into the ground, at Matt Taibbi points out in this searingly depressing article here. Wall Street campaign money and Wall Street lobbying bought the massive and shockingly unwise financial deregulation of the period 1999-2000 that has put us so desperately in the hole. And, I am heartbroken to say, the Obama Administration seems to be more interested in listening to Wall Street insiders than the more level-headed economists who are trying to point out that the approach of pouring endless money into failed banks just won't work. 

And who was at Ground Zero of this catastrophe? Phil Gramm, radical right-wing Republican of Texas. Excerpt:

[The AIG chief's] outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D. For years, Washington had kept a watchful eye on the nation's banks. Ever since the Great Depression, commercial banks — those that kept money on deposit for individuals and businesses — had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, also prevented banks of any kind from getting into the insurance business.

But in the late Nineties, a few years before Cassano took over AIGFP, all that changed. The Democrats, tired of getting slaughtered in the fundraising arena by Republicans, decided to throw off their old reliance on unions and interest groups and become more "business-friendly." Wall Street responded by flooding Washington with money, buying allies in both parties. In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. The move did away with the built-in protections afforded by smaller banks. In the old days, a local banker knew the people whose loans were on his balance sheet: He wasn't going to give a million-dollar mortgage to a homeless meth addict, since he would have to keep that loan on his books. But a giant merged bank might write that loan and then sell it off to some fool in China, and who cared?

The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields. "By ruling that credit-default swaps were not gaming and not a security, the way was cleared for the growth of the market," said Eric Dinallo, head of the New York State Insurance Department.

And the Democrats went along with this lunacy, I am sorry to say.

There are those of us in the Democratic Party--the Democratic Wing of the Democratic Party--who have tried to fight the corporate influence that has been steadily co-opting what should be the party of ordinary working people. The Republican Party is already a wholly owned subsidiary, owned lock, stock, and barrel by Big Corporate America. The Democrats, hungry for campaign money, have succumbed far too often to corporate bribes. As a progressive, I am deeply depressed about this.

President Obama MUST CHANGE HIS APPROACH. Break the big banks up, sell off the profitable parts, and wipe out the other parts. Nationalize the worst culprits, clean their corrupt management out, and then quickly reorganize and sell them back to private companies. But this tactic of pouring unlimited money into the hands of the very people who brought us this disaster is tragically wrong. Please, Mr. President, stop listening to the so-called "Wall Street experts" who have caused this crisis--and start listening to the American people.