Today, a story is gonna come out, probably make the rec' list, people whining "so and so is against Glass-Steagall," "the (partial) repeal caused the crisis," etc.
Its always tempting to try to find something easy to blame. It gratifies the human need for quick answers and provides closure. It also makes a person a target.
This is unfortunate because sometimes it ignores complexities, other times its a vehicle for simple hatred, or other times, it is both. A good example of this is about the repeal of Glass-Steagall, which occurred in a veto-proof bill that no President was going to bother to veto and waste political capital on before an election year, especially after one of the most wasteful opposition-executed witch hunts in American history.
I think the truth has been told about this:
Facts such as that Bear Stearns, Lehman Brothers and Merrill Lynch — three institutions at the heart of the crisis — were pure investment banks that had never crossed the old line into commercial banking. The same goes for Goldman Sachs, another favorite villain of the left.
The infamous AIG? An insurance firm. New Century Financial? A real estate investment trust. No Glass-Steagall there.
Two of the biggest banks that went under, Wachovia and Washington Mutual, got into trouble the old-fashioned way – largely by making risky loans to homeowners. Bank of America nearly met the same fate, not because it had bought an investment bank but because it had bought Countrywide Financial, a vanilla-variety mortgage lender.
Meanwhile, J.P. Morgan and Wells Fargo — two large banks with big investment banking arms — resisted taking government capital and arguably could have weathered the crisis without it.
This guy is no conservative Republican here. Same with
Andrew Ross Sorkin, of "Too Big To Fail" fame:
Citi’s troubles didn’t come until after Bear Stearns, Lehman Brothers, A.I.G., Fannie Mae and Freddie Mac were fallen or teetering — when all hell was breaking loose.
Why do we have financial crises? Why do banks lose money?
If history is any guide, it hasn’t often been the result of speculative bets. It has been the result of banks making loans to individuals and businesses who can’t pay them back.
Yes, standards became so lax that buyers didn’t have to put money down or prove their income, and financial firms developed dangerous instruments that packaged and sliced up loans, then magnified their bets with more borrowed money.
But it often starts with banks making basic loans. Making loans “is one of the riskiest businesses banks engage in and has been a major contributing factor to most financial crises in the world over the last 50 years,” Richard Spillenkothen, former director of the division of banking supervision and regulation at the Federal Reserve, wrote in a letter to Politico’s Morning Money on Monday. He said that if Glass-Steagall still existed, it “alone would not have prevented the financial crisis.”
repeal of Glass-Steagall has not been the key driver of this consolidation, which began long before 1999.
Clearly, people who know about business, know the truth. I admire Elizabeth Warren's fanship of the American middle class and worker. But that does not excuse her, Bernie Sanders, or others for peddling an easy to swallow myth. We need not play off easy sacrificial lambs, but truth and detail.
I think Hillary has good people helping her carve a path to build an even stronger economy, such as Barney Frank. She has the knowledge, know how, and experience to make our recovery even stronger.