In a lengthy article in Rolling Stone Feb. 12, Matt Taibbi presents the Gramm-Leach-Bliley bill (GLB) repealing Glass-Steagall in 1999 as not only a national disaster on that account, but also as legislation which contained a number of hidden “time bombs” which have since gone off and destroyed the availability of essential commodities such as aluminum, electricity, oil still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, the pipelines that deliver it; and zinc, copper, tin, nickel, natural gas, and precious metals. He calls GLB “one of the most transformative laws in the history of our economy—a law that would make possible a broader concentration of financial and industrial power than we’ve seen in more than a century.”
The “explosive” part of GLB was that it legalized new forms of monopoly. GLB also contained a provision which permitted commercial banks to go into any activity that is “complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally,” Taibbi says, and quotes University of North Carolina Law Prof. Saule Omarova, who says that from the standpoint of the banks, “pretty much everything is considered complementary to a financial activity.”
Sen. Sherrod Brown (D-OH) who voted for it, said “Nobody knew the reach [GLB] would have into the real economy.”
Banks that own chains of business interests have been caught rigging prices in those industries; e.g., JPMorgan Chase and Barclays have been fined $400 million for allegedly manipulating the delivery of electricity in California and elsewhere.
Another time bomb GLB introduced was a “grandfather clause” which said that any company that became a bank holding company after the passage of GLB in 1999 could engage in, or control shares of a company engaged in, commodities trading. No one is clear on what this “grandfather” clause means; e.g., in 2012, the Federal Reserve Bank of New York — the most powerful branch of the Fed, and primary regulator of these matters, wrote, “The legal scope of the exemption is widely seen as ambiguous.”
Taibbi notes that Marc Rich, whose pardon Bill Clinton was slammed for as his Presidency was under siege, was a commodities trader engaged in such deals made possible by the repeal of Glass-Steagall. And who recommended his pardon? “Eric Holder recommended Rich be pardoned,” says Taibbi.
Return to Glass-Steagall, Says Alex Henderson in Salon
Alex Henderson of Alternet shows the disastrous bailouts of the six largest “banks” in the U.S., which resulted from the repeal of Glass-Steagall. Now, we are told that because they were bailed out, they have grown, and are now “Too Big To Fail!” These six parasitic banks now comprise, together, 56% of U.S. GDP.
Bank of America owns 17% of all home mortgages in the U.S., and 12% of all U.S. bank deposits, $50 trillion in derivatives; if it goes under, American taxpayers are “on the hook for $55 trillion in potential losses,” according to Matt Taibbi.
Goldman Sachs assets went from $46 billion in 2007 to a post-bailout $113 billion today.
JPMorgan Chase received $25 billion from the government’s TARP program in 2008, now has $2.4 trillion in assets, and boasts that its value is 12% of the value of the England’s economy.
Wells Fargo had $669 billion in assets before 2008, and today has $1.4 trillion.
Citigroup received a $45 billion bailout in 2008; today its assets are $1.3 trillion. It has $58 trillion in derivatives exposure. While 1,400 banks have disappeared since 2008, Citibank and other TBTF banks have grown larger.
Morgan Stanley was created because of Glass-Steagall, as the Morgan investment bank. In 2013, its assets totaled $832 billion. Morgan Stanley’s exposure to derivatives is $1.7 trillion.
While Henderson mentions Dallas Fed President Richard Fisher’s belief that commercial and investment banking need to be separated, he fails to mention that there are four bills in Congress now to reinstate Glass-Steagall. A look at the cancerous growth in the six largest banks shows it must be reenacted now.