Ask not who the banks will screw; ask if this is still our country
And that’s what I thought would happen when in 2008—less than ten years after the repeal of the New Deal era law Glass-Steagall—we saw America’s big banks nearly take down the global economy.
Glass-Steagall had separated banking and investing in order to avoid the sort of crashes we saw in 1929 and again in 2008. Simply put: No tax, tariff or law will ever cost us more than the nine million American jobs and trillions in property and retirement savings we lost by setting Wall Street’s greed free to crash our economy.
Why wasn’t Glass-Steagall put back in place? Senator Richard Durbin said it best in 2009:
The banks own this place.
With almost no help from the GOP, some reform was put into place through Dodd-Frank. Aspects of it, such as Elizabeth Warren’s Consumer Financial Protection Bureau, were excellent. Many of the best parts—such as the Volcker Rule, which would prevent the banks from gambling in a way that threatens our economy—have been dulled or erased by the banks and their friends in the Republican Party.
Three years later, we find out that JPMorgan Chase lost two billion dollars in one bad investment. Suddenly we recognize that the stop signs are still gone.
Now, it seems, we seem presented with one of those unique moments in history where something could possibly get done. James Pethokoukis who is a chief hagiographer of the Koch brothers-funded American Enterprise Institute is suggesting that Mitt Romney call for the breakup of the big banks. Why? Because he knows more bailouts are inevitable if we don’t:
I don’t for a second think a President Romney would let a bank go under if he thought it would shock the financial system, much less multiple banks as may have been the case in 2008. As Romney said in his book, No Apology: The Case for American Greatness: “Secretary [Hank] Paulson’s TARP prevented a systemic collapse of the national financial system.” But to avoid another bank bailout, Romney would do what, exactly? Maybe JP Morgan’s troubles will given him an idea …
In the Senate, Sherrod Brown (D-Ohio) has introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE or SAFE Act.
Under the proposed law, no bank-holding company could have more than $1.3 trillion in total liabilities (i.e., that would be the maximum size). This would affect our largest banks, which are $2 trillion or more in total size, but in no way undermine their global competitiveness. This is a moderate and entirely reasonable proposal.
I know that there is too much at stake in this year’s election to distract with other issues. But this is the core issue of this election: is our democracy so corrupt that the powerful can continue to threaten our economic security to make a few extra billion dollars?
Our President has proven he’s willing to reform the banks. We should find out if Mitt Romney is willing to join him.
[CC image by JefferyTurner | Flickr]