What is “The Glass-Steagall Act” – And why we need it back

 

What is “The Glass-Steagall Act” – And why we need it back

In the wake of the worst depression in America in 1929 where the stock market failed and commercial banks went bankrupt, two members of congress proposed an act that bears their name – Glass and Steagall (G-S).  In 1933 the act became law and it protected banks, the stock market and all Americans for 66 years.

The Glass-Steagall Act said that commercial banks could not own or operate insurance companies or investment banks.  The term “Investment Bank” means Wall Street firms.  Investment banks issue stocks, speculate and engage in very risky behavior.

 The G-S Act was the financial foundation for a stable and growing economy, but it kept hundreds of billions in depositor money away from the scammer jammers and the crooks on Wall Street.

Then under Clinton, in 1999 with All Republicans voting YES this act was repealed with a new law that removed all restrictions G-S was passed.   

The driving forces behind this new law were Phil Graham, Alan Greenspan (Fed Chairman), Henry Paulson (Goldman crook), Ben Bernanke, Tim Geithner, Larry Summers and many others now in the Obama administration.  None of these people have suggested we go back to G-S.   

All objective sources agree that the great depression in 1929 was caused by lack of regulation and the ability of commercial banks to play the stock market.  Sound familiar?

What has happened since the financial collapse and the taxpayer bailout of all the crooks that caused the collapse?  Nothing!  There is no new law, G-S hasn’t been reinstated and the same rules exist now that existed when the Big Banks and Wall Street caused the collapse.  Could it happen again?  Oh yes and it will if nothing is done. 

I other part of this story is the total failure of the SEC to regulate new creative and very risky securities called derivatives.  There are now over $600 trillion in derivatives in play in the financial markets and more are being issued each week.

What is a derivative?  It is something that derives its value from something else.  It is not stock.  When you buy a share of stock you buy a part of a company, its assets, patents, plants, equipment, products and all other assets.

When you buy a derivate you buy a chance to gain if something else happens.  A derivative is a GAMBLE pure and simple .  It has NO inherent value.

Why were derivatives created?  There only reason they were created was to further the ability of large speculators to gamble.  Before derivatives speculators could buy and sell stocks, bond, short, longs, puts and calls.  Seems like a lot of ways to gamble. 

The second reason and just as important, was to provide another way for Wall Street firms that sell them to make huge fees.    

So $600 trillion worth of derivatives are in our worldwide marketplace, not a small number.  Are derivatives REGULATED?  No!    

There is no disclosure statement, no rules about how they are advertised and sold and no laws for those that sell lies and fraudulent derivatives to others.

The SEC has no power to review new issues and so the public is not protected.  Wall Street likes it this way and so do the Republicans.  Are fraudulent derivates being sold and traded?  No one knows.  Would the crooks on Wall Street sell bad investment just to make huge fees?  Let’s see, I can sell $50 million in derivatives today and make a 5% fee for myself ($2.5 million) and I know these are very risky, but I don’t have to tell anyone and no one can make any claim against me if these go bad. 

The current situation gives Wall Street a license to steal and guess what – they are.

We need to reenact The Glass-Steagall Act and to put all derivatives under the control of the SEC regulations.

Will this happen?  Nope.  Obama is listening to the very people that worked to get G-S tossed and these same people don’t want any regulation of the markets.  But not to worry most of the crooks are in a favored class – “TOO BIG to FAIL.”  Obama, Bernanke and Geithner have guaranteed Wall Street they will be bailed out again with taxpayer money when they go under, because they are TOO BIG to FAIL.

 America loves capitalism for the middle class and main street; and socialism for the rich and Wall Street.