It's the Economy Stupid

I'm not what you might call a financial genius. Other than my 401k and my pittance of a bank account, I don't have any investments. No stocks. No bonds. I've never played the market. I've asked for help from different sources any number of times in this arena, but have had returned to me advice that boggles my mind. Like I said, no genius.

What I do think I understand is history. And history tells me we're in the midst of a rather significant era, the likes of which a non-historian might claim we've never seen but which a historian would say we haven't seen in 80 years. Well, 79 on October 29th to be exact.

No, this is not the beginning of a second Great Depression. At least, I think it's too soon to say it is. But this ain't no financial picnic either. We're in some trouble.

Rampant speculation. Flawed borrowing. High-risk lending. How could this happen? Didn't we learn? When did this all start?

I recommend that you familiarize yourself with the Glass Steagall Act and the Gramm Leach Bliley Act. I don't care if you think you're a Republican or a Democrat; the tale of these two acts will lead you to look at our country differently, methinks.

The Glass Steagall Act? In short, FDR's banking reforms. Established the FDIC. A control on rampant speculation. The Glass Steagall Act had been under siege since the 70s. Too many restrictions. Not enough power for banks. The Republicans wanted it repealed. But Democrats fought it. You'll find the Dems' arguments below:

The argument for preserving Glass-Steagall (as written in 1987):
1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments. - Good idea

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses. - Sound familiar?

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

Well, if Glass Steagall is in place, then how could the subprime mortgage crisis happen? How could the economy be so bad?

The answer: the Glass Steagall Act was ransacked. Sure, the FDIC is still around. But that's about it. For the most part, the Glass Steagall Act was repealed. By the Gramm Leach Bliley Act.
This act allowed for banks to become 'whole banks' again. It allowed for the already formed conglomerate Citigroup - the merger of Citibank and Travelers - to cease being illegal back in 1999. It allowed for the renaissance of the Gilded Age. Morgan, Vanderbilt, Rockefeller, Rothschild, and Carnegie reborn; and up to their old tricks. But not in industry as before. It's in the finance.

Does that spelling of Gramm seem familiar? Phil Gramm, the one-time presidential campaign co-chair of the McCain campaign as well as a continuing senior economic adviser. By the way, he's the one that called the United States a nation of whiners. Do you want even more good news about Gramm? He was one of the 5 co-sponsors of the Commodity Futures Modernization Act of 2000 which contains the Enron Loophole.

But this gets better. I told you I'm being completely bi-partisan here. I've already mentioned McCain and his ties to the dubious Gramm. But who eventually signed both the repeal of the Glass Steagall Act and the Commodity Futures Modernization Act? 1999 and 2000? Slick Willie Clinton. As I said, this ain't about Republicans and Democrats. This is about the haves and have nots. Those in government have too long been in bed with the corporations. Corporatocracy, it's called. The inability to separate government from business. The Bush family and their oil connections. The Clintons and their corporate connections. Two sides of the same coin.

I give to you a New York Times excerpt of a June 2007 interview with the CEO of Goldman Sachs, Lloyd Blankfein (Goldman Runs Risks, Reaps Rewards):

“We’ve come full circle, because this is exactly what the Rothschilds or J. P.
Morgan the banker were doing in their heyday. What caused an aberration was the
Glass Steagall Act.”

You're seeing the results. The rich are getting richer. And God help the poor. Now, a $700 billion dollar bailout? Are you freakin' kidding? For these private equity firms that lobbied 30 years in the first place to get that Glass Steagall Act repealed? Obama calls it welfare for Wall Street Execs. Isn't it?

And Treasury Secretary Paulson wanted NO OVERSIGHT. That means that he wanted the money and wanted to have NO ACCOUNTABILITY. And Bush told the Congress that they better just go along with it so that we could resolve the problem. Am I in the Twilight Zone? Oh, and what does this make Bush? It's my understanding that FDR was the guy who bailed this country out the last time. And that Republicans are for smaller government. Did I miss something?

I don't have a great answer for you. But there's a lesson to be learned. Please remember that most of FDR's alphabet soup agencies didn't do much. FDR had about as much of an idea of how to fix the economy as Hoover had. But the unemployment benefits, the banking reforms, and the social security programs he did enact were very popular. That got him through the 1936 election. Then the Great Depression ended. Do you happen to remember how? A desperate country across the Atlantic elected a man who would change the course of world history. The rise of Nazi Germany and the attack by Japan jumpstarted this country like no other event could.

Do not doubt that history could repeat.

At this point, the world is feeling the repercussions of the financial problems. Our enemies smell blood in the water. We're embroiled in two wars. We're still dependent on foreign oil. And now our houses aren't worth what they were when we bought them; I know mine isn't. People are wondering how they're going to get through the winter with oil prices so high. People are wondering how they're going to purchase food as their prices rise. People wonder if their jobs may be outsourced to a land of cheap labor. Look to see for whom you work and then look to see who owns them. I see Lone Star owns my company. I see that they're purchasing Citigroup toxic debt. They're purchasing Barclay's - who just purchased part of Lehman Bros - debt. This isn't far from us.

'Desperation is the raw material of drastic change. Only those who can leave behind everything they have ever believed in can hope to escape.' (William S. Burroughs)

The old man says that the sin of omission will always be more abominable than the sin of commission. Perhaps we should commit to fighting the good fight. To becoming leaders in our local communities. To realizing that this country consists of more than greedy corporate leaders. To uniting as labor unions once did and challenge the status quo. To showing the world that we can reassert the prominence of a great country.

Or we can fail 'not with a bang but a whimper'...