Elizabeth Warren, joined by John McCain, has introduced the most significant financial regulatory bill since 1933. 21st Century Glass will shift the risk of $700 trillion to $1.2 quadrillion swap derivatives (without foundational value) and all the too complex to explain investments based on sociopathic Wall Street greed back to the Trojan Mega Bank Holding Companies like: JP Morgan Chase, Wells Fargo, Citi, Goldman Sachs, Morgan Stanley and Bank of America. And these enormous toxic creators of leverage too big too explain, will then have to separate their investment bank divisions from the commercial side of the bank.
Only 21st Century Glass will shift the infinitely dangerous seemingly infinite risk back to where it belongs.
In 1933 Glass-Steagall separated commercial banks from the investment side of the banks which caused the bank failures in the Great Depression. In 2000 Larry Summers and Greenspan advised Clinton to sign Gramm-Leach-Bliley which killed Glass and deregulated sociopathic greed. And this not only allowed, but fueled our current grotesque amount of financial inequality and caused the 2nd worst economy since 1776. Therefore, Summers and Greenspan must be considered as two of the worst economic advisors of all time.
21st Century Glass restores regulations to control greed and will remove the systemic risk of investment banking sociopathic greed again. Currently the full faith and credit of our treasury is underwriting all the risk and all the profits for the Bank Holding Companies (BHCs), so there is a critical need to separate BHCs from Investment Banks.
The Fed has also been a primary enabler of all the egregious leverage, by having allowed the investment banks to become BHCs, and then not enforcing Fed regulations that make complex securities that are too to explain well enough to be understood unlawful. The actual regulation is in the link below.
Learn why the Fed is also guilty of enabling all the risk as well as the financial crisis: http://www.the5thestate.net/2012/10/03/fed-fails-to-regulate-galloping-inflation-vs-galloping-greed/\
TOO BIG TO EXPLAIN LEVERAGE is circling the globe like a giant H-bomb sized financial plague just waiting for a detonator to unleash a worldwide financial Tsunami. So there is a dire need to shift the risk back to the financial innovators who have profited from all the “too complex to explain” risk, and have placed our Treasury and country in imminent jeopardy.
From How We Got Swindled by Wall Street Godfathers, Greed & Financial Darwinism:
Chapter 5: Greedy Deregulated Banks Abandoned Prudence and Reason for Fees and Bonuses
“…Glass-Steagal was enacted in 1933, in the wake of the Great Depression, in order to prevent overly large commercial banks being involved with stock market investment. It was clear that huge banks had taken huge risks with depositors’ assets as well as with their own by buying new issues, lending money to companies whose stock they invested in, and encouraging their customers to invest in their investments. The consensus then was that banking activities were the fundamental cause of the depression due to bankers’ unbridled, greedy appetite for the vast rewards to be had from egregiously leveraged, highly speculative risky investments. Banks were allocated one year to decide whether they wanted to specialize in commercial banking or investment banking, because Glass-Steagal set up a regulatory fire-wall between the two types of activities. This was primarily designed to preserve banking assets in the event risk underwriting failed. And it seems that risk underwriting then, like today, was done essentially to justify participation in selling anything – no matter how much leverage – to generate fees.
By 1999 all was forgotten and all the lobbying to allow all financial entities to get into each other’s business (pants) resulted in huge profits for Wall Street and Banks, profits which were not properly added to surplus for stability but paid out as bonuses. All the CEO and executive officers became Bull Market geniuses in the race to pile individual incomes, fees and bonuses higher than Mt Everest. The Gramm-Leach-Bliley Act of 1999 repealed: the Banking Act of 1933 known as Glass-Steagal; and the Bank Holding Company Act of 1956, which prevented bank holding companies headquartered in one state from acquiring a bank in another state and from engaging in the insurance business – further, the approval of Federal Reserve Board was required under this act to establish a bank holding company. Graham-Leach-Bliley, once again, allowed Mega, Trojan-like Banks to come alive, like dinosaurs rising from the dead to gobble up our economy as they did in 1929….”
Dodd-Frank “reform” is an optical illusion which will not stop a tiny tsunami. So our treasury will remain on the line unless we mandate that sociopathic swine investment banks assume the risk of their own greed. And the only way is to separate them from Bank Holding Companies is the Warren-McCain Bill.
Former Sen. Phil Gramm (R-TX), ethically challenged and heavily conflicted Wall Street shill, drove the getaway car for Greenspan and Summers – because he was the lead sponsor of the Gramm-Leach-Bliley legislation that repealed Glass-Steagall as well as the 1956 Bank Holding Company Act. These three are at the top of the list of the ones most responsible for the financial crisis; and for the tragic financial inequality. Gramm also was the creator of default swaps and the totally deregulation of derivatives when he had Wall Street Lawyers draft a bill he sponsored and got passed termed: The Commodity Futures Modernization Act of 2000 which was described as reform, but was the opposite.
Gramm joined UBS in 2002 immediately after retiring from the Senate and successfully deregulating greed. So Gramm’s support for sociopathic greedy narcissists did go unrewarded by UBS. And in 2009, Gramm was elevated to be the Vice Chairman of the UBS investment banking division. Gramm has never stopped promoting greed and the job creator myth.
In a July 9, 2008 interview on McCain’s economic plans, Gramm (who ironically was McCain’s economic advisor) explained the nation was “not in a recession,” and patronizingly told his fellow Americans: “You’ve heard of mental depression; this is a mental recession.” He famously added, “We have become a nation of whiners, you just hear this constant whining, complaining about a loss of competitiveness, America in decline.” (truly a great American shill,)
Click on this link for Warren-McCain’s legislative text, which includes the following definition of “securities entity” for the purpose of its regulations:
(I) includes any entity engaged in —
(aa) the issue, flotation, underwriting, public sale, or distribution of stocks, bonds, debentures, notes, or other securities;
(bb) market making;
(cc) activities of a broker or dealer, as those terms are defined in section 3(a) of the Securities Exchange Act of 1934;
(dd) activities of a futures commission merchant;
(ee) activities of an investment adviser or investment company, as those terms are defined in the Investment Advisers Act of 1940 and the Investment Company Act of 1940, respectively; or
(ff) hedge fund or private equity investments in the securities of either privately or publicly held companies; and
(II) does not include a bank that, pursuant to its authorized trust and fiduciary activities, purchases and sells investments for the account of its customers or provides financial or investment advice to its customers.
This is very specific and not open to elastic interpretation, so will be seen as harmful by large banks. Because, if regulators do their job with integrity – it will require major banks to spin off investment (and insurance) divisions, greatly reducing their size and scale – and shift all the risk of the financial innovators back to where it belongs, on the heads of the profiteers.
This is the most significant financial proposal to regulate greed in 6 decades, and it must become law. So get behind Elizabeth, and McCain who is seeking redemption in a material way. Americans need to understand this because our financial future is really on the line. When you read the language in this bill – keeping in mind the underlying context, you will get it.
Write letters to your representatives and POTUS to not appoint Summers to replace Geithner – and get behind 21st Century Glass. Should we live with risk that is geometrically greater than the mortgage loan debacle?
Buy my book from Amazon, about which David Satterfield, former Business Editor of the Miami Herald and two times Pulitzer Prize Winner, said this:
“This should be must-reading for every policy maker in Washington and every student of economics and finance.”