Glass-Steagall Fans Are Not Fools

(Warning: Article about the business world ahead. Trust me, even if you don't care about business you just might find this interesting.)

In a recent interview with my former boss, Steve Forbes, Barclay’s Chief Executive Bob Diamond said something truly shocking. The subject was financial industry regulation, specifically The Glass-Steagall Act. Diamond contended that those who wish to see the return of this act simply don’t know what they’re talking about.

This is his exact quote: “The thing I find interesting is that people that I’ve heard say, ‘Let’s return to Glass-Steagall,’ when challenged actually don’t know what Glass-Steagall was. And, you know, Glass-Steagall may or may not have been appropriate in the 1930s. We certainly shouldn’t be looking backwards; we should be looking forward.”

Wow, that’s a lot to parse in just three sentences. And far be it from me to take issue with the thoughts of a leading banker, but that’s just what I am going to do.

First, let’s be clear. I don’t know who Diamond has spoken to, but it’s fair to say there are among those that want its return who are smart, informed and experienced hands in the financial world. Among those hands none are more experienced, or indeed more respected, than Paul Volcker, advisor to President Obama and former Federal Reserve Chairman. He is also one of the few who can honestly claim to have righted a broken economy.

Let there be no mistake Volcker is very much in favor of putting Glass-Steagall back in place. I base this on his statements before Committee On Banking And Financial Services of The House of Representatives, on September 24, 2009. Though he never mentions Glass-Steagall by name this is what he said:

“I particularly welcome the strong reaffirmation of one long-standing principal—the seperation of banking from commerce—that has long characterized the American approach toward financial regulation.”

Folks, that is Glass-Steagall. In fact this is specifically what Glass-Steagall was drafted to do back in 1934: keep banks and brokerages from colluding because our leading politicians then, unlike now, recognized that when these combined it lead to financial ruin. Glass-Steagall was then in place, with some revisions, until 1999 when it was replaced by The Financial Services Modernization Act, aka The Gramm-Leach-Bliley Act. Gramm-Leach-Bliley in turn gave bankers what they had craved all along: unfettered ability to mingle banks and brokerages and watch them grow, grow, grow. This, to our sorrow, is exactly what happened.

A little perspective is in order. When people think of the financial reforms of the New Deal, often the creation of the Federal Depositors Insurance Company is what comes to mind. In reality the FDIC was the last major piece of financial regulation created during FDR’s initial sweep of big reforms. The first thing he signed into law was Glass-Steagall. That’s how important it was. That it took over six decades for it to be overthrown, despite near constant lobbying from the financial services industry, is a testament to how reasonable, how good, how strong a piece of legislation it was.

It is this legislation, which helped rebuild America’s financial services industry from the ruins, Diamond mocks. It is people like Volcker, that he belittles.

Look, no banker wants Glass-Steagall back. Passing G-L-B was truly like handing the keys to the inmates. Banks went hogwild, soon becoming “too big to fail.” How could they not?

This isn’t conjecture, it’s fact. At the end of 1999, just after G-L-B was signed into law the financial services industry comprised just 13% of the total value of the Standard & Poor’s 500 index. By three years ago, during the bubble, that total had risen to 20.1%.

Of course what goes up must come down and that total had shrank to 8.8% by March 9, 2009 after the banks imploded. Now flush with taxpayer money the banks are back up to 16.3%. The lesson: banks win.

When G-L-B was signed into law Senator Phil Gramm (R-Texas) crowed about his new legislation. His press release from November 4, 1999 reads today like the worst case of unintended irony ever:

“I believe we have passed what will prove to be the most important banking bill in 60 years.” Yup, just not in the way he intended.

Then he castigates the banking regime he just helped overthrow, calling it largely inefficient and, if you can believe it, “unstable.” That sound you just heard was you smacking your forehead in disbelief.

As for G-L-B he insisted the future looked bright. It will “open up new competition,”—it did the opposite, making mega-banking conglomerates. It will “create wholly new financial services organizations in America”—it did, much to our woe. It will “literally bring to every city and town I America the financial services supermarket”—and it did, until they all collapsed and we ended up owning most of them.

By Gramm’s own criterion Gramm-Leach-Bliley has to be considered a fiasco. This is from his closing floor statements from the day GLB was signed into law:

“How will people judge whether we were successful in passing this bill today? … My test is, What are we trying to do in the bill? Are we trying to benefit banks or insurance companies or securities companies, or are we trying to benefit consumers and workers? … Ultimately the final judge of this bill is history.”

It is and history has spoken … to the tune of $800 billion in bailouts and counting, funded by consumers and workers, benefiting banks. On second thought maybe I am being too kind to Gramm. It’s entirely likely his questions above were rhetorical … we just didn’t know it.

A small footnote: after his illustrious senate career ended in 2002 Gramm immediately got a job with, yes, a bank: UBS. This is not too surprising because from 1997 through 2002 banks were by far his biggest contributors. A press release from the day he was hired said he would advise clients on corporate finance issues and strategy.

One hopes his advised his clients on strategy better than his new employer did, because from the day Gramm was hired until now UBS has been an absolute disaster, with its share prices down 14%, while the plain old S&P 500 is up 45%. It too, got bailed out. Gramm’s midas touch continues, yet somehow we end up paying for it.

Democrats Opposed To The Health Care Bill Need To Grow Up

CNN.com has laid out, in a very simple and easy-to-follow format, exactly how much the general public would benefit from the passage of the monumental health care bill. The answer: enormously.

Here are some of the highlights:

"Eliminating caps: If you buy a policy, a health care company will not be able to place a lifetime -- or annual -- cap on how much they will cover. This is will be especially important for those diagnosed with serious illnesses, such as cancer, who face steep medical bills.

Pre-existing conditions: The Senate bill includes $5 billion in immediate support to provide temporary coverage to uninsured Americans with pre-existing conditions. The money would help you until the new health care exchanges in the Senate bill are put into effect in 2014.

Children and pre-existing conditions: Another thing that's going to be very important, CNN Senior Political Analyst Gloria Borger said, is that there will be no exclusion of children with pre-existing conditions.

Dependent children: Your children will be covered until the age of 26.

"Children who are over 21 and may not have a job that pays their health insurance can still be on your policy," Borger said. "That's very important to a lot of families."

Small business tax credits: Those tax credits are aimed at helping small businesses buy health insurance for their employees. Tax credits of up to 50 percent of premiums will be available to firms that offer coverage, according to the Senate's plan.

Preventive care: All new insurance plans, Obama said, will be required to offer free preventive care in order to "catch preventable illnesses and diseases on the front end."

Appeals process: A new independent appeals process will be set up for those who feel that they were unfairly denied a claim by their insurance company.

Help for seniors: If you fall into the Medicare Part D Drug Benefit coverage gap, dubbed the "donut hole," you will receive $250 to help pay for prescriptions."

This sounds like an excellent bill to me then. It benefits small business, the uninsured, seniors, children, and is firmly in favor of citizens, not insurance companies and their ilk.

It will save hundreds of billions of dollars, if not trillions according to the Congressional Office of Management and Budge. (See the full story here, the OMB numbers are at the bottom of the page.) I have heard that doctors would suffer under the new bill. If that is so someone forgot to tell the American Medical Association, which also endorsed the bill.

There is simply no reason to not support this.

Which is why I find it so annoying that all this rests in the hands of a few Democrats. Look, Republicans would never get behind any healthcare reforms, precluding the massive $500 billion giveaway they gave to pharmaceutical companies in 2005, under the watchful eye and arm-twisting of that highly respected conservative Tom Delay. (This is a link to the masterful "60 Minutes" expose on that unholy deal.)

But this is what you can expect of Republicans/Conservatives: obstruction for its own sake, being ill-informed on even their signature issues, and general hatred of all good, rational progress. They hate Obama, period, and were never going to give him a chance. They hated Bill Clinton, and never gave him a chance. Par for the course. What are they for? God only fucking knows. Because they sure don't seem to. God in schools, but no books? Hard to say.

Be this as it may I am much more annoyed by the holdups coming from Democrats than I am Republicans. How stupid, how venile, how spoiled a brat do you have to be to be against a bill that would expand coverage to literally women, children and senior citizens ... and men too? That eliminates the evil little spending caps insurance firms put on your policy? That reduces that bullshit "donut hole" that screws people who can't afford life-saving medication?

People are so ill-informed about this that I swear on a bible I met a woman in the airport who was against health care reform because she thought it would expand the so-called hole in the donut. This was a desperately poor woman in her late 50s, with few prospects and no money, literally scrimping to buy the drugs she needed to live. And somehow she became convinced that the bill would make that worse. It was so tragic. I had a copy of "The Wall Street Journal" with me that day, but I hadn't read it yet. After she left, I opened it and on the front page it described how the new bill would help close the donut hole. I almost wanted to flag down her plane, but it was too late. She still probably doesn't understand.

Is the bill perfect? No, far from it. Will we get a better one if this one doesn't pass? Are you fucking serious? If this thing doesn't pass, forget it, healthcare reform is dead for another 20 years. Does it have the public option? No, and for that I am sorry, and sad. But there comes a time when you have nut up and take the best deal offered, no matter whether it has everything you want in it. Politics is the art of the possible. This bill is possible. The public option, despite the reams of sense it made, and how well it works in every other first world nation, was not possible. We are a dumb nation. And if we think health care reform is expensive wait until there is real educational reform. This is an even bigger problem, because it will make the masses less easily swayed by dumb, illogical arguments. Those in power fear that the most.

It's not a perfect bill, but no one can say it didn't get properly aired and debated. And when I think of American history most of the best legislation was hard to pass. The civil rights era voting legislation was literally passed because LBJ rallied the troops around the recently buried body of JFK. Meanwhile horrible, malignant tumors like The Patriot Act and the passing of the useless Homeland Security mega-office, not to mention the Iraq War, and the horrifying Gramm-Leach-Bliley Act all sailed through when all the votes were tallied.

This is America: the good stuff comes out over the dead bodies of far too many powerful, entrenched, malicious idiots. The horrible stuff goes through with nary a hitch.

The Mayor Of Toddlerville

The Mayor

Okay, I am sure every parent thinks their kid is the center of attention, the kid other kids gravitate to. But I'm pretty sure Stella is all those things. In fact I've started to think of her as The Mayor. The Mayor Of Toddlerville, that is.

I first started to notice this when I walked in, late, to a local sing-along at The Oak and The Iris cafe, near us. Ms. Katie the singer was strumming along, all the kids were a-whirl on the floor before her, and there right in the front was Stella Rae, getting down as all the other kids spun around her, a light radiating from her smile, completely at home. The center of it all.

Other kids, I believe, kind of feel this way about her too. Stella has a few friends who run right up to her when she enters a room (she likes them too, it's not one sided.) Older girls, in particular, can't get enough of her, they crowd around her.

Stella even has some older, older friends that I don't know too well. There is one local nannie, a very nice woman, who comes over and talks to us (her) every time we're out together. But she's mainly talking to Stella. I'm just her spokesman at this point.

At Storytime Stella is always welcomed and greeted by the other kids and by Miss Cindy, who reads. She sometimes doesn't know the other kids names, but Stella? She picks her out right away. She's not always sure who I am, though.

Okay, I am surely biased here. Every parent thinks, no KNOWS, that their child is special. And they are. To them. Other people maybe don't care so much. But I get a feeling I am pretty much right on in thinking of Stella as The Mayor ... of Toddlerville. It's a wonderful place to be, but you can't stay forever anyway. Soon enough you have to move on to Pre-Schoolville. So then we'll see. I'm not too worried.