What Wise Men Say - honest banking
Today's New York Times (Oct. 22, 2011) reports on discussions with leading banking authorities who say Glass-Steagall is far superior to imitations like the "Volcker Rule," and, though hated by investment banks, is necessary. Author James Stewart says he found no one who actually supported the Volcker Rule.
Originally three pages when Volcker wrote it to Obama, due to banks' objections it has now swelled to 298 pages and nobody understands it. Volker himself said, "I don't like it, but there it is. I'd write a much simpler bill. I'd love to see a four-page bill that bans proprietary trading and makes the board and chief executive reponsible for compliance. And I'd have strong regulators. If the banks didn't comply with the spirit of the bill, they'd go after them." Former Sen. Ted Kaufman (D-DE), who tried to introduce a Glass-Steagall amendment into the Dodd-Frank bill with Sen. Sherrod Brown (OH), said, "Here's the key word in the rules: `exemption' ... pronounced `loophole.' I know these Wall Street guys ... You give them the smallest little hole, and they'll run through it."
A spokesman for Sen. Richard Shelby (R-AL), who supported the Kaufman-Brown amendment, said that in drafting Dodd-Frank, "Congress willfully ignored the ramifications of its actions, just as it did in repealing Glass-Steagall.
Rep. Peter Welch (D-VT), a co-sponsor of Glass-Steagall, said, "The fact that it's 300 pages shows the banks pushing back and having it both ways." Henry Kaufman, who at 84 is one of Wall Street's "wise men," former director of Salomon Brothers and author, has argued for years that the proposed Volcker Rule doesn't go far enough. "My view is that we should break up the big financial conglomerates and separate investment banking."
Said Sen. Kaufman: "I think Paul volcker is great, but let's step back and ask, why are we doing this? We're doing this becaue we don't want banks with Federal deposit insuranace to be involved in risky investments. There's a simple solution. We didn't have that problem for over 60 years, because we had Glass-Steagall. It worked, we changed it, and guess what? We got into trouble. I want to go back to what worked for 60 years. That's a very conservative position."
On Main Street, there is more support for Glass-Steagall:
* On Oct. 12, the 15,000-member United Association of Journeymen and Apprentices of the Ohio State Plumbing and Pipefitter Industry, AFL-CIO, passed a Memorial Resolution to Congress in support of H.R. 1489.
* Mark Manta writes in the Cape Cod Times: "Regarding the Occupy protests, almost all of the ills being voiced in the protests across the country ... have been caused by one thing: the repeal of the Glass-Steagall Act in 1999. Unfortunately, most Americans are not even aware of what this law is. Glass-Steagall was enacted in 1933 to restore integrity to the banking system .... The single most effective way of resolving the largest number of problems now facing us is reinstating this law. There currently is a bill in the Congress to do this, House Resolution 1489...
* Dick Helm writes to the Duluth (Minnesota) News Tribune, "We used to have banking regulatons called the "Banking Act of 1933," written by Sen. Carter Glass (D-VA) and Rep. Henry B. Steagall (D-AL) who did not want bank loans to become a deadly gamble. However, in 1999, some members of both parties considered these laws designed to protect the public to be very restrictive..." The letter blames Congress for the repeal, and says that that's whom the demonstrators should go after.
* Thomas Nath writes in the Post Bulletin, "I support [OWS] protesters when they call for reinstatement of the Glass-Steagall Act. ... Renewal of Glass-Steagall would avert future bailouts by separating lending banks from commercial banks, and preventing the creation of mega-banks..."
* British Lord Robert Skidelsky, a biographer of John Maynard Keynes, writes in www.Project-syndicate.org, "Glass-Steagall aimed to prevent commercial banks from gambling with the depositors' money by mandating the institutional separation of retail and investment banking. The result was 65 years of relative financial stability." Skidelsky then runs off the track.