Taking Stock: Bring back Glass-Steagall

Dear Mr. Berko: I was listening to a TV journalist interviewing several prominent economists and fund managers, all of whom indicated that one of the causes of our financial crisis was the Glass-Steagall Act. I have heard similar comments on other occasions since then. What is this act, and how can it contribute to a financial crisis that is this serious? RP in Ft. Walton Beach, Fla. Dear RP: Some of us hear but don't listen, while sadly, some of the few who do listen don't hear. The Glass-Steagall Act was passed by Congress in 1933 during the wake of the 1929 stock market crash in the midst of a nationwide banking collapse and the Great Depression. The GSA erected a ''firewall'' between investment banking and commercial banking. It ensured that commercial banks like Wells Fargo, JP Morgan Chase, Morgan Stanley, Bank of America and Citigroup stay out of the investment banking business, while Goldman Sucks, Merrill Lynch, Bear Stearns, Smith Barney and Dean Witter stay out of the commercial banking business. Commercial banking activities before GSA were aggressively and destructively speculative. Banks took huge risks aiming for even bigger returns. Their activities became slip shod, and bankers couldn't care less that they were speculating with the public's ''uninsured funds.'' They made unsound loans to unsound public companies, purchased their stock and encouraged depositors to buy the same shares. They took enormous risks and failed, creating a run on a banking system that couldn't pay its depositors. Basically, these banksters aided and abetted the Great Depression. Sound familiar? But what you heard was that the repeal of GSA in 1999 by Congress was the catalyst and continuing fuel that scorched the U.S. economy. Wall Street's naked greed, its perverted honesty, unspeakable hubris and contemptuous management vacuumed trillions of dollars from the pockets of 300 million Americans. Wall Street's new billionaire and trillionaire banksters should be the candidates for federal prison, not little Martha Stewart who was jailed in 2004 for making $200,000 on inside information. Wall Street has no more conscience than a fox in a poultry farm. But that's the immutable nature of these people. In an April 2010 article in Rolling Stone magazine, Matt Taibbi compared Goldman Sachs to a ''great vampire squid, wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money'' -- an apt description that also applies to Bank of America, JP Morgan and Citigroup. These Wall Street banksters colluded amongst themselves and with lesser squids (Wells Fargo, PNC, US Bancorp, Bank of New York Mellon, etc.) to drive up the price of industrial and farm commodities such as oil, wheat, copper, soybeans, aluminum, corn, etc. They were so successful that the huge trading desks at Goldman, Citigroup, Bank of America and JP Morgan made huge profits in each of the quarter's 63 trading days. That's 63 consecutive days of trading profits. What are the odds of flipping a penny to come up heads 63 times in a row? Would you believe nearly 6 billion to one? And in the process, the real cost of living (not the government's risible and wimpy numbers) for the first six months of 2011 averaged 13.7 percent. And what those commentators are telling you is that it was the REPEAL of the Glass-Steagall Act that contributed enormously to our financial crisis, not the act itself. Allowing these Wall Street banks to continue feeding their greed is destroying our democracy, our economy, our retirement plans and our freedoms. Please address your financial to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2011 CREATORS.COM Published: Thu, Aug 18, 2011