THIS MUST NOT HAPPEN AGAIN - Really?

Well that's what they said back in the 1930s depression after the financial collapse happened. Then they enacted the Glass-Steagall Act, which seemed to work very well for 50+ years. Then Glass-Steagall was repealed, and less than 10 years later we had another financial collapse and are going into a world depression that we hope won't be worse than 1933.

Glass-Steagall was sponsored in 1933 by two congressmen named, naturally, Mr. Glass and Mr. Steagall. It mandated the separation of commercial banks from investment banks. Then in the late 1990s the brilliant Clinton administration decided to repeal the Act after much cajoling by bank lobbyists. < Of course we assume no bribes aka campaign contributions took place. But who knows. > Joe Stieglitz, a nobel laureate, was an economic advisor in the Clinton administration at the time. He vehemently opposed repeal and stood in Robert Rubin's way from doing this. Rubin was the Treasury Secretary at the time, after working for years at Goldman Sachs. < Sound familiar, Hank? > All of a sudden one day, Joe Stieglitz was no longer in the Clinton administration < old newsmen call this missing in action >. And shortly thereafter Glass-Stegall was repealed after much more lobbying by the banks, and one sadly has to assume, money changing hands.

Now there is talk about new bank regulation to prevent the recent financial debacle from ever occurring again. Rumors are that Bernanke wants Daniel Tarullo, another Fed governor, to head a committee to propose bank regulation changes. Mr. Tarullo served in the Clinton administration.

Why not just reenact Glass-Steagall and quit wasting all this time? After all, it worked well before?

Well besides making a lot of politicians look stupid if Glass-Steagall  were reenacted  and them basically admitting they screwed up massively, there's the other problem of all those giant banks that make such generous campaign contributions, now using your money since TARP. They like things the way they are. Besides, investment banking can basically be a way to print money. Just look at how many Collateralized Debt Obligations they created with fat fees and commissions. Then there's all those Treasury auctions that they can make guaranteed commissions on, the money then being used to bail them out. Guido could write a small book describing all the scams and rackets they work to turn an outrageous buck. But could he stand doing it without vomiting.

In the past, when there has been scandal and derelict management, reform has occurred in America.  The 1930s and the 1970s  being the most recent. Then in the late 80s / early 90s we had the savings and loan crisis. Basically it was swept under the table and nothing done to improve things. Today we are regressing into even worse mismanagement.

There has to be big changes. Powerful interests have to step aside or be removed. In short, the Augean stables must be cleaned. And boy do they stink.

If not, the change will eventually be violent. It's called revolution. Guido prays it will never come to this.

Soon I will write more on this in another article that compares America today with France in the 1700s. Space and time prevent me now.

"The public interest takes precedence over the private" - Plato