A Safer Economy

The following is an excellent excerpt from the book “THIS FIGHT IS OUR FIGHT: The Battle to Save America’s Middle Class” by Elizabeth Warren from Chapter 2: “A Safer Economy” on page 91 and I quote: “Financial Regulations Matter – And that’s really my point here: regulations matter.  From the 1790s to the 1930s, there weren’t many financial regulations, and the economy swung back and forth from boom to bust every twenty years or so.  Banks boomed and banks crashed.  The busts were long and hard; with no cop on the beat, uneasy investors held tight to money that might have funded good business ideas on Wall Street.  With no antitrust laws, corporations began to grow much bigger, and many ran roughshod over both customers and small competitors.

When Franklin Roosevelt said we could do better, he reined in the big banks and giant corporations in ways that had never been done before.  Government became a more active participant in keeping markets honest.  Together, over time, we built economic stability and growth.  In the 1980s, Ronald Reagan turned that around.  He declared that government was the enemy and began unraveling the regulatory net, and he led the country down a path that ultimately resulted in the greatest economic crash since the Great Depression.

The timeline above says it all: basic rules of the road bought us decades of financial stability, and weakening those rules put us back on the path to a giant boom and an even bigger bust.

Sure, there are lots of other pieces to the puzzle, and I’ll talk about some of them later.  But it’s time to face facts: we have already paid dearly for the deadly mistakes of Reagan-era economics, and if we ignore the big lesson here, our country will ultimately pay an even higher price.  Despite the evidence, a significant portion of the political elite seems determined to stay on the same path.  The Republican president, the Republican leadership, and the Republicans in Congress continue to sing the same song: To propel this economy forward, put the regulators on a tight leash and then let giant corporations do whatever they like.

I’ve been in the U.S. Senate for four years, and I’ve listened to these guys until I can deliver most of their speeches in my sleep–after all, most of them are reciting the same mind-numbing nonsense they’ve chanted since Ronald Reagan first smiled and waved his way into the White House.  It’s as if the deregulation of the last thirty-five years never happened and the crash of 2008 was just a bad dream that can be whisked away with an elegant silk hankie.

When Donald Trump says he wants to repeal the financial regulations that President Obama put in place, he’s just signing up for the same old deregulation strategy that Republicans have embraced for decades.  He even said Dodd-Frank “made it impossible for bankers to function.”   Well, it definitely made it harder for bankers to function in the reckless way they used to–that was the whole point!  Republicans like Newt Gingrich say Trump’s presidency is one more “great effort to break out of the Franklin Delano Roosevelt model” of government.  I wonder if Newt is planning to bail out the banks himself next time around.

I don’t love all regulations–no one does–but some problems can be solved only when our government writes and enforces a set of rules.  How else are we going to take on fraud, antitrust issues, and a banking industry that has the power to wreck our economy?  Look at it this way: if corporations can cheat people or crush their competitors or load up on risks–and if their top executives can stuff their own pockets by leading their corporations in those directions–then sooner or later, one of them will do it.   And once one of them cheats, everyone else is caught in a bind–follow the cheater or get left behind?  Not every CEO of a giant bank may have wanted to get into the scam-your-customer mortgage business, but once the competitors were raking in hundreds of millions of dollars from it, the practice got really hard to resist.

This big, dynamic, very complicated economy of ours needs some basic regulations in place to make sure markets work, and it’s not hard to come up with some straightforward rules that can make an enormous difference.

For starters, we should put in place a modern version of Glass-Steagall and separate plain-vanilla banking like checking accounts and savings accounts from crazy risk-taking on Wall Street.  That doesn’t have to be partisan.  My first cosponsor for a twenty-first-century Glass-Steagall bill was the Republicans’ 2008 presidential nominee, Senator John McCain.  In 2016, Donald Trump campaigned on this idea, and, at his insistence, adopting Glass-Steagall was added to the Republican platform.  But the Republican leadership in the House and the Senate has refused to move any such legislation, and now President Trump has put in place an economic team that is headed in the opposite direction.  No one ever offers to explain exactly why giant banks should be able to benefit from government insurance and gamble on Wall Street at the same time, but the bank lobbyists have managed to block this bill from going forward.

Here’s another idea: the SEC should hire a leader who doesn’t work for Wall Street–and it should get a much bigger budget so that the agency can actually go out and enforce the law.  There have been some good SEC commissioners who have shown some real courage, and this shouldn’t be partisan either, but the latest nominee to head up the SEC built his entire career by aggressively protecting Wall Street from government regulators.  Anyone who thinks he’s suddenly going to get tough on the same people who fed him so well for so many years doesn’t know the chummy Wall Street fraternity.

Oh. and here’s a good one: when CEOs break the law, they ought to go to jail, just like anyone else. the words chiseled in stone above the Supreme Court are EQUAL JUSTICE UNDER LAW.   This is not followed by EXCEPT FOR CORPORATE EXECUTIVES.

Let’s also put some steel in the spines of our prosecutors and start enforcing antitrust laws again.  Small drugstores and start-up airlines and even innovative new approaches to health insurance should get a chance to try out their ideas.  I believe in a government that works for the people–not for the giants in the industry–and that government should promote competition every chance it gets.  Concentration is bad for consumers and bad for innovators; worst of all, it puts everyone at risk when things really go south.

I understand that not everyone will agree with me on each of these proposals.  But let’s be clear: America has been warned, first with the S&L crisis in the 1980s and then the crash of 2008. We survived, but that last financial bomb was nearly fatal for our economy–and for tens of millions of Americans families.  We can’t afford another hit.

And the risk is still there.  As one top economic commentator pointed out recently, “Since 2010, there have been major scandals at banks on nearly every continent for every reason: malfeasance, incompetence, complacency.”  In 2016 alone–eight years after the financial crash and even after tougher regulations were put in place–three major banks got into serious trouble.  Deutsche Bank hid so much risk on its books that the International Monetary Fund said it posed a substantial threat to the global financial system.  Wells Fargo was caught pumping up its stock price by cheating more than two million customers.  And Citigroup agreed to pay hundreds of millions of dollars in fines for manipulative practices that gave it an illegal advantage in trades.

Meanwhile, banks are still Too Big To Fail.  Actually, some are bigger than ever, or So Big We Can’t Let them Stub Their Little Toesies.  The Federal Reserve Bank and the FDIC recently announced that Wells Fargo was so large and so badly managed that if that bank alone started to stumble, it could drag the whole economy down with it–unless, of course, it got a bailout.  In a long academic paper, a former Treasury secretary and an economist analyzed volumes of financial data about banks.  Their conclusion: in 2016, the big banks are not significantly safer than they were just before the crash in 2008–in fact, they may be even riskier.  The financial crisis is long past, yet the banking sector is still loaded with corporations that could blow up the economy?  Good grief.  We need stronger rules, not weaker.

This stuff is serious–serious as a heart attack.  The big banks put all of us at risk, and it’s the kind of risk familiar to my grandparents: it’s lose-your-house, lose-your-job, lose-all-your-savings risk. Giant corporations that jack up their prices or run over their competitors may not cause our economy to explode, but they squeeze us in so many ways that they’re capable of causing a long, slow, decline, one that could become irreversible.

Every problem is made worse by the fact that the world in which these giant banks and corporations operate is getting faster and more complex every day.  A debt crisis in Greece or Hong Kong can have ripple effects that influence lives in small towns in Ohio or Alaska.  Republicans may want to look the other way, they may continue to make their mindless demand for smaller government, and they may pretend that helping giant corporations will always help America’s working families.  But this is a fiction we can no longer afford.

Roosevelt was right: we can do better.  We need some clear-eyed people in the room, people who recognize that we are heading straight into disaster.  We need fearless public servants who will pick up the tools of government, put the interests of the public servants who will pick up the tools of government, put the interests of the people ahead of those of the banks, and do everything possible to reduce the risk of catastrophe.

Aunt Bee and I were on the phone in late 1999, not too long before she died.  At ninety-eight, her health was beginning to slip a little, but she still loved to talk.  We often spent these calls remembering the people who were gone–her brothers and sisters, my grandparents, little Jimmy, who died of leukemia when he was twelve.  The other character in our family play–the Great Depression–was still there, too.  “Those were hard times, Betsy,” she said during that call.  “But we made it.”

Yes, the Great Depression was a bone cruncher, but it was also our chance to build a stronger America–and that’s what we did.  We built a better country then, and we can build a better country now.  We have to be smart: as conditions change and as corporations figure out new ways to cheat people or crush their smaller competitors, we must adapt our regulatory tools so we can fight back.  But we’ve got to start by picking up those tools and using them.

Government is not our enemy; government for the people is our ally.  Government–not corporate America–provides a way to enforce some basic rules so that all kinds of markets work.  And as Roosevelt showed us, the markets must not be allowed to work only for the rich and powerful.  They’ve got to work for all of us.”

(THE FOLLOWING IS ABOUT THE AUTHOR AND I QUOTE:

ELIZABETH WARREN, one of the nation’s most influential progressives and a longtime champion of working families and the middle class, is the senior senator from Massachusetts.  A former Harvard Law School professor, she is the author of ten previous books, including A Fighting Chance, a national bestseller that received a widespread critical acclaim.  The mother of two and grandmother of three, she lives in Cambridge, Massachusetts, with her husband, Bruce Mann.”

MY COMMENTS: THIS IS THE SECOND BOOK THAT I’VE READ BY SENATOR ELIZABETH WARREN AND BOTH OF THEM ARE GREAT BOOKS, POINTING OUT THE PROBLEMS WE HAVE IN WASHINGTON, D.C. AND HOW TO REPAIR THEM.  ONE OF THE MOST SERIOUS PROBLEMS IS TO MAKE SURE WE KEEP OUR LOCAL BANKING SYSTEM HONEST AND WORKING FOR THE CUSTOMERS AND NOT JUST FOR THE CEOs WHO SEEM TO MAKE PLENTY OF MONEY.  THIS HAS BEEN THE HISTORY OF BANKING OVER THE LAST 150 YEARS OR MORE.  WE HAD THE 1929 BANKING CRISIS AND DEMOCRAT PRESIDENT FRANKLIN ROOSEVELT SAVED US FROM THAT.  THEN WE HAD THE S&L BAILOUT UNDER REPUBLICAN PRESIDENT GEORGE H.W. BUSH AND THAN WE HAD THE 2008 $700 BILLION TARP BANK BAILOUT UNDER REPUBLICAN PRESIDENT GEORGE W. BUSH.  REPUBLICANS CONSTANTLY SAY WE DON’T NEED BANKING REGULATIONS AND THEN WE GET ANOTHER BANK CRASH.  THEN THEY GO TO THE TAXPAYER–DEMOCRATS AND REPUBLICANS–TO BAIL OUT THE BANKS.  AND NONE OF THE BIG CEO VIOLATORS IN THE 2008 CRASH EVEN WENT TO JAIL.  THIS IS WHY THIS SEGMENT IS REALLY A GREAT READ.  SO, HOPEFULLY, YOU BUY THIS BOOK OR GET IT OUT OF YOUR LOCAL LIBRARY AND READ IT ENTIRELY.

LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran

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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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