A Suggestion to Bernie and Hillary: Revive Glass-Steagall
A political campaign should make promises clear enough that after the election, voters can see whether or not they are kept. “I will do the right thing” is not such a promise. “I will deal with the big banks” is not such a promise. “I will put America to work again” is not such a promise. “Neither I feel your pain” nor “I feel your anger or resentment” is such a promise.
And a political campaign should promise a comprehensive program of changes—where change is needed—rather than promise only one or a few elements of such a program.
If a candidate wants to promise to change America from a wholly-owned preserve of big banks into a revitalized place where anyone able and willing to work can get a job, what should that candidate promise?
If a candidate wants to change America from a place where big businesses (including big banks) write the laws, as it is today, into a place where big businesses are subject to the laws, and the laws are enacted in the public interest, what promises should such a candidate make?
If a candidate wants to put Americans back to work and also to get done the important—indeed, mandatory—work that the nation needs to get done, what should that candidate promise?
Such a political program requires a big promise with several parts.
The first element of such a promise is a promise to propose legislation to re-establish Glass-Steagall (described below) as it was in 1960 (or perhaps in 1990) and to re-invigorate anti-trust laws and/or the enthusiasm of anti-trust regulators and enforcers.
Of course, since banks and other elements of America’s oligarchy will resist such changes, reducing the power over elections and over administrative regulators of undemocratic money—the “big” money of corporations and of billionaire individuals, chiefly—would seem to be a prerequisite for achieving these aspirations.
The second element of such a promise, accordingly, would be to propose legislation to reduce the power of big money in politics. Efforts in this direction are a project of, for instance, End Citizens United.
The third part of the promise, looking toward fuller employment among other goals, would be a promise to propose legislation to energetically work to slow and reverse Global Warming / Climate Change (”GWCC”) and legislation for the rebuilding of infrastructure especially in America’s oldest cities.
Because the memory of the world-wide crash of 2008 is still so vivid today, in addition to promising to reestablish the Glass-Steagall legislation (see below), I’d also propose re-establishing all Glass-Steagall’s enforcing regulations as well, and do so immediately, without any long pause for regulatory drafting or much opportunity for interference by banking lobbyists.
And, of course, perhaps as an element of anti-trust effort, I’d propose breaking up the big banks so no one of them is any longer “too big to fail”. That’s the beginning of making sure that their CEOs are also not “too big to jail”.
Re-establishing Glass-Steagall and breaking up the big banks would, I believe, be better “medicine” to avoid a repeat of 2008 than anything else.
Therefore, I suggest that Bernie (and then, I trust, in short order, Hillary) state the following—very simply and very clearly:
Promise: If elected I will within 100 days after inauguration send legislation to the Congress which will in effect re-establish the Glass-Steagall Act and legislation as needed to break up the big banks.
Promise: If elected I will within 100 days after inauguration send legislation to the Congress which declares that no-one but human beings in America may spend money to effect political action in America and Congress may place a cumulative annual cap on such spending. And if the courts strike down this legislation, I will propose a Constitutional Amendment to the same effect.
What is Glass-Steagall Anyway?
The broad purpose of Glass-Steagall was to separate commercial banks from investment banks and brokerages. The Federal Reserve Banks could lend to commercial banks at low rates (rates which have been about 0% now for a long while) but investment banks and brokerages would have to borrow from “the market” just like all other businesses. No longer would investment banks get an illegitimate boost from their commercial side with its essentially free borrowing. And no longer could bad investments on a bank’s “investment” side threaten the money left with the banks by depositors or borrowed by the banks from the Federal Reserve Banks.
The easiest way to re-establish Glass-Steagall would be to repeal the enactments which repealed Glass-Steagall or any of its parts, but to save any enactments (after the Banking Act of 1935) to the extent that they strengthened the public protections of Glass-Steagall.
(Sadly, of course, there are many devils in all these details!)
The goal of this legislation (perhaps Sen. Warren could help with the drafting!) would be, roughly, the following, aiming to cleanly re-separate commercial from investment banks:
* commercial banks are banks that take in deposits and make loans
* investment banks are banks that underwrite and deal with securities
One year after the proposed legislation goes into effect, no commercial Federal Reserve Member Bank (or any other commercial bank) may:
* deal in non-governmental securities for customers
* invest in non-investment grade securities for themselvesunderwrite or distribute non-governmental securities
*own any interest in or affiliate (or share employees) with any company involved in such activities.
*no securities firm or investment bank may take deposits or own any interest in or affiliate or share employees with any commercial bank.
*the regulations made after 1933 and before 1960 shall be re-established,
Since I am not a banker I have probably made some mistakes here. But this is the drift.
To the extent the legislation aims to make things safe for investors, depositors, and for the economy, it will do well for the public. To the extent the legislation aims, instead, to improve the prospects of any banking concern or brokerage, it will become corrupt—as we saw in 2008.
Anti-trust was a good idea when it was established. “No business too big” was the idea. Sadly, this idea has been pretty much abandoned by recent administrations and the law. The idea needs refreshment.
Ending “banks too big to fail” would be an excellent place to start. No-one can say America did so badly from 1933-1960. The financialization of the economy has replaced real business with unhelpful and dangerous financial boondoggles.
We need jobs for ordinary people, right here in America, not shipped overseas to Asia. Reforming banking may help, but government spending on necessary work—too long neglected—will be beneficial to the public both for the tangible benefits it provides and also for the jobs it provides. Ask the residents of Flint, or any other old city!
Returning manufacturing (and the repair of declining infrastructure) is one way to begin making America a nation of workers rather than a hunting-preserve of predatory bankers.
And combating GWCC is another—one which should not wait. (It should not even wait even so long as until November!)
Combating Global Warming / Climate Change Must Be Part Of The Mix
GWCC is the world’s (and America’s) greatest and most necessary and most pressing task today, and no political essay is complete without showing how combating GWCC fits in with its topic.
Sadly, the interfering propaganda of fossil-fuel interests has confused the issues of GWCC and made many Americans believe that GWCC is either a hoax or something that can safely be ignored for another generation. Neither is true. Thus, a large educational effort will be required to make this clear to America. President Obama can and should work on this immediately.
Since I am concerned with American jobs, an important way to begin is to address the world-wide problem of Global Warming / Climate Change by steadily building, as quickly as possible, renewable electric generating capacity and replacing with it all of our current fossil-fueled electric generation capacity—and otherwise ending the use of fossil-fuels, as in transportation (including airplane transportation), in the military, manufacturing, and building heating. These are big projects and necessary, and will provide jobs for many people for many years.
Promise: If elected I will within 100 days after inauguration send legislation to the Congress which provides during the period 2017-2027 for the annual shut-down of 10% of America’s 2016 fossil-fueled electric power generation capacity and the replacement of at least that 10% with renewable electric power generation capacity, some publicly and some privately owned.
Back to the Banks
But let’s start with the banks! All these projects will require loans! And the big investment banks are too busy with crazy and dangerous financial schemes to do any lending these days. If the replacement of America’s fossil-fueled electric generation facilities is to be done, even in part, by private capital, there will be needed a great deal of banking (lending) in the public interest.
So, as I read it, these three elements of a major political program for today, fit together reasonably well.
By contrast, any political program which fails to deal with the banks, the oligarchy, and GWCC, will be a recipe for continuing disaster.