Brad Hicks: "Epimetheus Howled"
Mar. 25th, 2009 at 4:48 AM
On November 5th, 1999, the man who is now Barack Obama's chief economic adviser was Bill Clinton's Treasury Secretary. It was the day that Congress passed a bill that he had lobbied hard for, the Gramm-Leach-Bliley Financial Services Modernization Act of 2000. And as I'm very glad to have been reminded by Boing-Boing guest blogger Richard Metzger, who dug it out of the New York Times archives, this is what Lawrence Summers had to say about Gramm-Leach-Bliley: "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century. This historic legislation will better enable American companies to compete in the new economy." (Stephen Labaton, "Congress Passes Wide-Ranging Bill Easing Bank Laws," NYT, 11/5/99, page A1.) Here's what the bill's primary sponsor, John McCain senior economic adviser Phil Gramm had to say about it that day, from the same article: "We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century. Glass-Steagall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer."
And here's what North Dakota senator Byron Dorgan said, again from the same article: "I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010. I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness." [Neb's emphasis] But then, he's basically nobody, right? Who's going to believe a bench-warming nobody from the middle of nowhere, when celebrated geniuses from both political parties say otherwise? Who's going to listen to a borderline socialist from one of the last states in the US to still have a Democratic Farm-Labor Party instead of a Democratic Party, Minnesota DFLP senator Paul Wellstone, when he says that all these experts are "determined to unlearn the lessons from our past mistakes," when (unnamed) math wizards from the most prestigious economics school in America, the University of Chicago, are assuring the NYT's reporter that "the Glass-Steagall Act was not the correct response to the banking crisis because it was the failure of the Federal Reserve in carrying out monetary policy, not speculation in the stock market, that caused the collapse of 11,000 banks. If anything, the supporters said, the new law will give financial companies the ability to diversify and therefore reduce their risks."
Epimetheus howled.
You know, I almost decided, like Metzger, that this stands by itself. But then I remembered that not everybody is old enough to remember some things that the article left out, things that had been in the news for months leading up to that pleasant and sunny Friday morning in November, almost ten years ago. So let me fill in a few missing pieces, and see if they don't remind you of a few things about our current situation. Because this didn't start on November 5th, 1999. This started on April 6th, 1998, a year and a half before Gramm-Leach-Bliley passed, and it started with one man telling the federal government that he just plain wasn't going to obey the law, and that man's name was Sanford I. "Sandy" Weill. Sandy Weill's purchase of Citibank, as CEO of the brokerage and insurance company Travelers Group, was euphemistically called a merger, but it was Weill who was calling the shots, and he was open from day one as to what he was doing: intentionally violating Glass-Steagall, the law that prohibited banks from owning brokerages and vice versa. He didn't agree with the law, he wanted it changed, he believed that banks should be able to gamble on more risky assets, and he intended to get even richer doing so. Under the terms of Glass-Steagall, on April 6th, 1998 a two-year countdown clock to the destruction of Citibank automatically began. If he was going to obey the law, he had until then to announce a plan to spin off all of the departments that Glass-Steagall said a bank couldn't own, and then another three years after that to complete the sales, or else surrender his banking license to the FDIC. Instead, he said, in effect, "come and pry it out of my cold, dead hands. Go ahead, kill off the single largest and most important bank in the world for being a scofflaw. I dare you," in terms almost that blunt.
Congress blinked. On almost the last possible day they could do so, they revoked the FDIC's permission to yank his banking license. Why? Because Citibank was too big to fail. And that meant that it was too big to be forced to obey US law. And to the right-wing Democrats in the White House, and the Republicans in Congress, that was just okay with them. Only a few "far-left" "radicals" and "extremists" thought otherwise. Who were the American people supposed to believe, a tiny minority of "far-left" "radical" "extremist" "socialist" nobodies, or "historians," "economists," "financial experts," college professors from "top universities," "successful entrepreneurs," senior spokesmen for both parties, and the President's own Treasury Secretary?
And I'm sure if you ask President Obama about any of this, he'll put on the usual basset-hound expression that he wears when you ask questions about prior misconduct, and give his usual stern speech about "looking forward, not backwards" (when refusing to look backwards is exactly what got us into this mess in the first place). So I don't have to ask what Barack Obama would say about any of the quotes in this article. But I would dearly love it if somehow, someone would read Lawrence Summers' above remarks to him, now, in public, on the record, and ask him to explain himself, just to hear what he would say.
Postscript: By the way, you know where current Obama administration Treasury Secretary Timothy Geithner was on November 5th, 1999? He was working for Lawrence Summers.
The OP
PS See my remark on Free Markets below.
On November 5th, 1999, the man who is now Barack Obama's chief economic adviser was Bill Clinton's Treasury Secretary. It was the day that Congress passed a bill that he had lobbied hard for, the Gramm-Leach-Bliley Financial Services Modernization Act of 2000. And as I'm very glad to have been reminded by Boing-Boing guest blogger Richard Metzger, who dug it out of the New York Times archives, this is what Lawrence Summers had to say about Gramm-Leach-Bliley: "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century. This historic legislation will better enable American companies to compete in the new economy." (Stephen Labaton, "Congress Passes Wide-Ranging Bill Easing Bank Laws," NYT, 11/5/99, page A1.) Here's what the bill's primary sponsor, John McCain senior economic adviser Phil Gramm had to say about it that day, from the same article: "We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century. Glass-Steagall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer."
And here's what North Dakota senator Byron Dorgan said, again from the same article: "I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010. I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness." [Neb's emphasis] But then, he's basically nobody, right? Who's going to believe a bench-warming nobody from the middle of nowhere, when celebrated geniuses from both political parties say otherwise? Who's going to listen to a borderline socialist from one of the last states in the US to still have a Democratic Farm-Labor Party instead of a Democratic Party, Minnesota DFLP senator Paul Wellstone, when he says that all these experts are "determined to unlearn the lessons from our past mistakes," when (unnamed) math wizards from the most prestigious economics school in America, the University of Chicago, are assuring the NYT's reporter that "the Glass-Steagall Act was not the correct response to the banking crisis because it was the failure of the Federal Reserve in carrying out monetary policy, not speculation in the stock market, that caused the collapse of 11,000 banks. If anything, the supporters said, the new law will give financial companies the ability to diversify and therefore reduce their risks."
Epimetheus howled.
You know, I almost decided, like Metzger, that this stands by itself. But then I remembered that not everybody is old enough to remember some things that the article left out, things that had been in the news for months leading up to that pleasant and sunny Friday morning in November, almost ten years ago. So let me fill in a few missing pieces, and see if they don't remind you of a few things about our current situation. Because this didn't start on November 5th, 1999. This started on April 6th, 1998, a year and a half before Gramm-Leach-Bliley passed, and it started with one man telling the federal government that he just plain wasn't going to obey the law, and that man's name was Sanford I. "Sandy" Weill. Sandy Weill's purchase of Citibank, as CEO of the brokerage and insurance company Travelers Group, was euphemistically called a merger, but it was Weill who was calling the shots, and he was open from day one as to what he was doing: intentionally violating Glass-Steagall, the law that prohibited banks from owning brokerages and vice versa. He didn't agree with the law, he wanted it changed, he believed that banks should be able to gamble on more risky assets, and he intended to get even richer doing so. Under the terms of Glass-Steagall, on April 6th, 1998 a two-year countdown clock to the destruction of Citibank automatically began. If he was going to obey the law, he had until then to announce a plan to spin off all of the departments that Glass-Steagall said a bank couldn't own, and then another three years after that to complete the sales, or else surrender his banking license to the FDIC. Instead, he said, in effect, "come and pry it out of my cold, dead hands. Go ahead, kill off the single largest and most important bank in the world for being a scofflaw. I dare you," in terms almost that blunt.
Congress blinked. On almost the last possible day they could do so, they revoked the FDIC's permission to yank his banking license. Why? Because Citibank was too big to fail. And that meant that it was too big to be forced to obey US law. And to the right-wing Democrats in the White House, and the Republicans in Congress, that was just okay with them. Only a few "far-left" "radicals" and "extremists" thought otherwise. Who were the American people supposed to believe, a tiny minority of "far-left" "radical" "extremist" "socialist" nobodies, or "historians," "economists," "financial experts," college professors from "top universities," "successful entrepreneurs," senior spokesmen for both parties, and the President's own Treasury Secretary?
And I'm sure if you ask President Obama about any of this, he'll put on the usual basset-hound expression that he wears when you ask questions about prior misconduct, and give his usual stern speech about "looking forward, not backwards" (when refusing to look backwards is exactly what got us into this mess in the first place). So I don't have to ask what Barack Obama would say about any of the quotes in this article. But I would dearly love it if somehow, someone would read Lawrence Summers' above remarks to him, now, in public, on the record, and ask him to explain himself, just to hear what he would say.
Postscript: By the way, you know where current Obama administration Treasury Secretary Timothy Geithner was on November 5th, 1999? He was working for Lawrence Summers.
The OP
PS See my remark on Free Markets below.