Saturday, October 04, 2008
Thursday, October 02, 2008
Those were the words of President Franklin Roosevelt in his first inaugural address on March 4, 1933 -- his famous "the only thing we have to fear is fear itself" speech aimed at rallying a downtrodden America to rise up and overcome the Great Depression.
Here's how our 32nd president described the "conditions facing our country" 75 years ago:
"Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone."
"More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return," Roosevelt continued. "Only a foolish optimist can deny the dark realities of the moment."
Or maybe a certain presidential candidate.
But back to our straight-talking president as he confronted a nation in the throes of economic calamity.
He said, "Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men."
The practices to which Mr. Roosevelt referred included what economist John Kenneth Galbraith, economic historian of the Great Depression, called "large-scale corporate thimble rigging" that "took a variety of forms, of which by far the most common was the organization of corporations to hold stock in yet other corporations, which in turn held stock in yet other corporations."
Does that sound familiar, too?
Carter Glass, a newspaperman turned politician, authored the Federal Reserve Act of 1913, predicted the consequences of banks lending money for stock market speculation, and after the stock market crash in 1929 and the widespread bank failures that followed, wrote a banking reform bill in 1931 to provide the Federal Reserve Board with more control over speculative credit practices by banks. His bill, the Glass-Steagall Act of 1933, regulated the "practices of the unscrupulous money changers" that drove the nation into the Great Depression.
It worked pretty well for 66 years, until the unscrupulous money changers had their way with Congress and then President Bill Clinton in 1999. They repealed Glass-Steagall with the passage of the Gramm-Leach-Bliley Act.
Former Senator Phil Gramm, Republican of Texas -- Sen. John McCain's economic adviser in his campaign and, reportedly, a likely cabinet appointee in a McCain administration -- sponsored the "deregulatory" legislation. He said at its passage:
"In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets. We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers."
Until the greed of "unscrupulous money changers" in the unregulated free market runs the free market into the ground. Then government becomes the answer again -- to the tune of probably a trillion dollars in the economic calamity of the 21st century.
Sen. McCain, by the way, voted for Gramm-Leach-Bliley, in a vote that closely followed partisan lines in the Republican-dominated 106th Congress. Sen. Joe Biden voted against the House bill in May 1999, but then voted for conference bill that reconciled the House and Senate versions in November 1999 -- a vote which Mr. McCain, then seeking the 2000 Republican presidential nomination, missed because he was campaigning in New Hampshire.
Sen. Barack Obama, at the time a member of the Illinois state senate, and Gov. Sarah Palin, then mayor of Wasilla, Alaska, didn't get to vote on it.
It pays to note that the Leach in "Gramm-Leach-Bliley" is former Republican congressman Jim Leach of Iowa, who crossed party lines to endorse Mr. Obama and delivered a speech at the Democratic National Convention this year. Mr. Leach would reportedly have some role in an Obama administration.
When President Bill Clinton signed the Gramm-Leach-Bliley Act, known as the financial services modernization act, into law on Nov. 12, 1999, he said it made "the most important legislative changes to the structure of the U.S. financial system since the 1930s." Did he know just how "important" those changes would be?
"Financial services firms will be authorized to conduct a wide range of financial activities, allowing them freedom to innovate in the new economy," Mr. Clinton said.
Freedom to innovate granted to Mr. Roosevelt's "unscrupulous money changers" got us pretty much right back to where we were when FDR took office. But for the intervention of Mr. Glass' Fed, you and I might soon be standing on a bread line.
In 1999, while Bill Clinton and the 106th Congress were entertaining us with the juicy details of the president's Oval Office trysts with intern Monica Lewinsky, they were actually busy undoing the underpinnings of the security of the nation's financial system. The phone sex and stogies were merely a side show. In the background, unbeknownst to most of us, there was true bipartisan cooperation to serve the interests of the titans of finance who, left to their own devices, would get us into a fix very similar to the conditions about which FDR spoke in March 1933.
That's the bipartisan cooperation comic genius Jon Stewart of The Daily Show last week called a "clusterf#@k to the poor house." He's right. He was right, too, about this: "Those who do not study the past get an exciting opportunity to repeat it."
Tuesday, September 30, 2008
The House yesterday rejected the so-called "bailout" plan that would have dumped $700 billion into financial markets. But at the same time, the feds are spreading billions of dollars around like Monopoly money.
From an article in today's NY Times:
"With money markets around the world seizing in fear, the Fed on Monday announced that it would provide an extra $150 billion through an emergency lending program for banks, and an additional $330 billion through so-called swap lines with foreign central banks to help money markets from Europe to Asia....
"That was on top of the $230 billion the Fed borrowed last week so it could finance its previous efforts to prop up the American International Group and other institutions. But these are only the latest in a long series of jaw-dropping departures from normal policy that the Fed has undertaken this year as it seeks to inject vast amounts of capital into the financial system. And they are unlikely to be the last."
I don't pretend to fully understand how all this works (or doesn't), try as I might, but it is certainly very very scary.
One thing that's much easier to understand is the lack of leadership on display in Washington. They played a game of chicken on the bailout bill. Nobody wanted to be caught holding the bag. Both "sides" wanted to be able to hold the the other responsible. Typical. And disgraceful.
Here's one other thing I don't get. How can McCain with a straight face blame Obama for the bailout plan being ditched by Congress, when McCain's party rejected it overwhelmingly. Even the eight members of the House representing McCain's home state of Arizona voted NO, including the state's four Republican congressmen. (The congressman from Alaska, also a Republican, voted no, too, I might add.) Way to deliver.
It's funny (using that word loosely) how the presidential candidates and all the political nonsense have so rapidly become largely irrelevant as we watch the train wreck that is Wall Street-Washington DC.