16 Mar (LPAC) Two additional Members of Congress—Benny Thompson (D-Miss.) and Barbara Lee (D-Cal.)—added their names to HR 129 late yesterday, bringing the number of co-sponsors to 40, plus Marcy Kaptur. It is clear that, with one week of Congress before the Easter recess, the fight for Glass-Steagall has intensified, both in public and behind-closed-doors. Thomas Hoenig, the Vice Chairman of the FDIC and former President of the Kansas City Federal Reserve Bank, has been traveling coast-to-coast calling for Glass-Steagall. On Feb. 28, he was in San Francisco, where he told reporters from the San Francisco Chronicle that the banks are too big and too complex, and all the signs are there of a new bubble set to blow. The only solution is the Glass-Steagall breakup of the too-big-to-fail banks. In the past several days, Hoenig has also given an interview to the New York Times TV network, reiterating the same point: the whole system is out of wack and must be transformed. He cited the danger of the universal banking model, noting that, back in 1992, banks were not allowed to engage in any of the reckless behavior that has been legalized in recent years.
Within hours of the conclusion of the Carl Levin Senate Permanent Subcommittee on Investigations hearing on JPMorgan Chase, former TARP Inspector General Neil Barofsky sent out a twitter message, picked up today by Huffington Post, saying that the JPMorgan executives were forced to admit that they conducted criminal fraud against regulators and their own investors by concealing the losses on the London derivatives trades.
Tom Dolan wrote a column today in the Wall Street Journal under the headline “Fishing for Fraud,” in which he chastised Mary Jo White for failing to show any proprietorial zeal to go after big bank crimes now that she is being confirmed as the new SEC head. He, too, said that nothing short of a full Glass-Steagall separation of the banks will be sufficient, noting that the so-called Volcker Rules are a joke—neither feasible nor effective in even cracking down on banks proprietary trading.
Hoenig, in his San Francisco interview, warned about yet another criminal enterprise by the big banks: their involvement in offshore “payday loan” operations. These typical shadow banking operations issue short-term loans to desperate people having trouble surviving from paycheck to paycheck. They borrow money with no interest rate caps from unscrupulous lenders who get as much as 700% interest. The big banks, like Bank of America, are not only providing credit lines to these shadow banking outfits. They are servicing the loans by taking automatic payments out of borrowers’ checking accounts—even after their own bank clients tell them to desist. This new form of mafia loan sharking has reached $7.2 billion a year.
The bottom line is that the evidence of high crimes by the big five Wall Street banks is out everywhere. Sen. Levin, along with Sen. John McCain, who is now the ranking Republican on SPSI, has been leading a non-stop exposé of the criminality of the big banks. It began with the Levin-Coburn Senate report on the 2007-2009 collapse, which singled out the repeal of Glass-Steagall as the primary cause of the bubble and crash. He immediately followed with the HSBC study, which took two years; and as soon as word got out of the JPMorgan Chase coverup of the massive derivative losses, he launched the nine-month probe, culminating in the new report and Friday’s hearing.
The combination of the continuing exposes of the criminality of the big banks and the Eric Holder public admission that these criminal bankers have been given a permanent exemption from jail by the DOJ has created a tremendous backlash.
There are reports that some Members of Congress are contemplating legislation that would make criminal prosecution mandatory in cases where banks are caught laundering drug money.
There is clearly a panicked effort underway by London, Wall Street and their Obama Administration to push back against the Glass-Steagall momentum. But the reality is that nothing short of Glass-Steagall will do the job; and it is our responsibility to drive that point home at every opportunity.