Feingold? The voice of Reason???
The Senator isn’t usually one of my favorite politicians. Wisconsin is a more liberal state than mine and their selection of senators seems to reflect that. But, they do maintain traditional values more than some eastern neighbors. Neither is the news full of their fiscal fiascos like the state that separates us, Illinois.
So, when I read about his rebellion, I was a bit shock. He was pretty much saying the things I’ve said around here.
Glass-Steagall Act
It was repealed in the waning days of the Clinton administration. It came into being during the depression. Banks were doing speculative things. When those speculations went south in the market crash, the banks failed left and right. Sound familiar?
Too Big to Fail (Volker rider)
This was part and parcel of the above. Banks and insurance companies could now merge with the investment banking side and the speculation and potentially massive profits were back. These mergers thrilled executives and investors alike as the profits and salaries skyrocketed. Nobody bothered to notice the piper in the background. Large corporations that were grounded in traditionally modest business plans became huge and speculative. Volker seeks to address this reality of too big by limiting risk.
My recollections of the Great Depression are anecdotal. It mostly centered around things like adults chiding, “Turn off the lights. Were you born in a barn?” and other frugal ideas based on past reality. The local bankers were a similar bit of a joke. They were the guys in the three piece suits when nobody wore three piece suits. Their lot in life was due diligence. They protected depositor assets and generated modest profits but it compounded and was a place old money could protect itself.
Banks had been trying to morph into something less staid and more profitable. During the era of “stagflation” that Volker finally killed, the usury laws that limited interest rates had to be set aside. Credit cards became a cash cow. Banks started feeling their oats while they developed lots more for reserves. Their problem became one of investing and growing further. There was also enough money around to lobby and kill Glass-Steagall.
What Feingold is saying (poorly, I fear) is that all this posturing on banking reform is not addressing the core issues that brought about the current situation. The congress is creating complex sets of conditions to add complexity to issues that are simply solve by reverting to an old law that worked for half a century. Volker would fine tune that a bit.
Instead we’ve got all this added complexity without providing a solution. That only makes lawyers and corporate boards happy. This is pretty much the way they approached the Health bill. Well, not quite. It looks like the insurers in this one are going to be the suckers in the loophole business. But, it does fail to address the root cause. Congress is so damn good at that these days. Posturing they know; solving issues beyond them.
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