How the New York Times Hides the Truth About Wall Street's Catastrophic Misdeeds
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The following piece is a co-exclusive with Wall Street on Parade.
The paper of record is in serious need of a fact checker when it comes to whether the Glass-Steagall Act could have prevented the financial crisis. Promoting ignorance could help sink the financial system -- again.
On April 8, 1998, the New York Times ran a slobbering editorial pushing for the repeal of the Glass-Steagall Act. It sounded like it came straight from Sandy Weill’s public relations flacks. Weill, head of Wall Street brokerage and investment firms Smith Barney and Salomon Brothers, as well as insurance company, Travelers Group, wanted to merge with a large commercial bank, Citicorp, owner of Citibank, and get his speculative hands on that pile of insured deposits.
The merger was illegal at the time under the Depression-era Glass-Steagall Act. The legislation was enacted after the 1929 stock market crash to keep speculative gambling on margin and risky underwriting of stocks away from conservative savers’ bank deposits. Jamie Dimon, today’s chairman and CEO of JPMorgan Chase, who just this year oversaw the blow up of $2 billion of insured depositors’ funds through risky derivatives trading, was Weill’s first lieutenant at the time of the merger and helped to mastermind the deal. The merged firm was called Citigroup.
The Glass-Steagall Act (formally known as the Banking Act of 1933) created the Federal Deposit Insurance Corporation (FDIC) and barred banks holding insured deposits from merging with securities firms or investment banks. The Travelers/Citicorp merger was also illegal under the Bank Holding Company Act of 1956 which barred bank and insurance company mergers.
The New York Times editorial gushed:
“Congress dithers, so John Reed of Citicorp and Sanford Weill of Travelers Group grandly propose to modernize financial markets on their own. They have announced a $70 billion merger — the biggest in history — that would create the largest financial services company in the world, worth more than $140 billion… In one stroke, Mr. Reed and Mr. Weill will have temporarily demolished the increasingly unnecessary walls built during the Depression to separate commercial banks from investment banks and insurance companies.”
What the New York Times calls “unnecessary walls” were the bulwarks that stood between the small investor and a rigged looting machine; between another Great Depression and a stable economy; between fair distribution of wealth and a nation with 46 million people living below the poverty level, including one in every five children; between a nation where people were proud to save to buy a few shares of stock and a nation that now reviles everything about Wall Street, from its lousy repentance to its obscene pay to its sappy regulators.
According to a CNN poll conducted October 14 - 16, 2011, 80 percent of Americans say Wall Street bankers are greedy; 77 percent say they’re overpaid; 66 percent say they are dishonest. And that’s likely just what’s fit to print.
Having greased the skids for the financial debacle, the New York Times, instead of doing an intense examination of how it got it so wrong, is now permitting the revisionist history of the crisis through the pen of its financial writer, Andrew Ross Sorkin, who doubles as a co-anchor at the serially conflicted CNBC.
On May 21, 2012, the Times published a piece by Sorkin titled, “Reinstating an Old Rule Is Not a Cure for Crisis.” The premise was that the Glass-Steagall Act would not have prevented the financial collapse -- the very claptrap coming out of the mouths of Wall Street lobbyists into the attentive ears of the Senate Banking Committee. The article put forth the following “facts.”
“Let’s look at the facts of the financial crisis in the context of Glass-Steagall.
“The first domino to nearly topple over in the financial crisis was Bear Stearns, an investment bank that had nothing to do with commercial banking. Glass-Steagall would have been irrelevant. Then came Lehman Brothers; it too was an investment bank with no commercial banking business and therefore wouldn’t have been covered by Glass-Steagall either. After them, Merrill Lynch was next — and yep, it too was an investment bank that had nothing to do with Glass-Steagall.