The Truth About Glass-Steagall


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THE TRUTH ABOUT GLASS-STEAGALL — Video by James Corbett of The Corbett Report

Review by Charles Sulka



James Corbett is a master at debunking false narratives — many of which are widely accepted by the public. In some — such as the generally accepted view that JFK was an opponent of the Federal Reserve and the banking cartels and this may have been a factor in his assassination — the reality is exactly the opposite of what is widely regarded as fact. (Watch the video for a lesson in fact-checking: THE JFK / FED MYTH BUSTED: G. EDWARD GRIFFIN ON THE CORBETT REPORT [ ].

Like all of us, Corbett is subject to his own biases. In some cases — and this video is a case in point — Corbett’s internalized biases impact his analysis of the issues. In this case, James Corbett seems to be unable to see the forest for the trees, so to speak. He misses the point entirely.

Corbett’s repudiation of the widely held view that the financial crisis of 2007-2008 (the Great Recession) was caused by the repeal of banking regulations (repeal of Glass-Steagall) might be correct, so far as it goes. He cites knowledgeable (if not objective) sources, and the logic is not unsound … at least as far as the basic premise is concerned. Indeed, it is shown that Glass-Steagall was not actually repealed at all (!) It is probably accurate to say that the supposed repeal of Glass-Steagall legislation was not, as has been widely repeated, responsible for the upheaval in the financial sector.

The problem is where the ‘experts’ try to go with this. Corbett’s video makes an unsupportable leap of logic, going way out on a limb from here. In this critical review, the experts cited by Corbett conclude that deregulation of the banking industry played no part in the financial collapse. This is simply not true. If this were true then the entire financial sector, banking, insurance, the whole lot of them, would be exonerated. One logical error thus exonerates all of the criminals in the financial sector, along with their cast of supporting actors (politicians and government economists.)

The video claims that the real cause of the financial melt-down was too much government … in the form of misguided government programs having as their ostensible purpose the promotion of home ownership through facilitating home mortgage lending. In other words, this is another anti-government screed — typical neocon propaganda. The so-called experts are apparently oblivious to the irony that (according to them) it was deregulation — loosening of standards for home purchasers — that resulted in the housing bubble that triggered the financial crisis. (Think about it.)

This video is a blatant attempt at disinformation. It is pure propaganda.

In actuality the problem was caused by the collapse of the productive economy, a direct result of the growth of the parasitic financial sector and neoliberal economic policies. People who lost their jobs due to the widespread off-shoring of manufacturing jobs or the collapse of the market economy found themselves unable to make their house payments. In addition, many home buyers were victimized by unethical lending practices and creative financial instruments which proliferated because of the deregulation mania that swept the nation, such as adjustable rate mortgages and unmanageable balloon payments. It is as simple as that.

Yes, there were some abuses in mortgage lending, but they were largely due to government deregulation which saw the proliferation of unscrupulous ‘mortgage brokers’ muscling in on the home mortgage business, and government deregulation (in the form of changes to the tax code) that encouraged speculation in real estate. And not least, the problem was exacerbated by government bullshit — politicians and economists droning on about how the economy was improving and everyone would soon be better off because of deregulation and so-called free trade. Everyone was optimistic, believing the government’s lies and economists’ nonsense. People tend to put their faith in government (a reckless thing to do, as we all have come to realize.)

It is unrealistic to blame the problem on mortgage lenders putting unqualified buyers in homes they couldn’t afford or didn’t deserve, which is the underlying message here. Buyers who found themselves without an income because their jobs had been off-shored to China instantly became ‘unqualified buyers’ in the eyes of these neocon propagandists. Yes, many buyers were unable to make their house payments, but not because of anything they or their mortgage lenders had done wrong. In truth, they were victims of irresponsible government promoting deregulation and globalization.

To say that deregulation of the banking industry played no part in the crash is simply untrue. The Savings and Loan industry was devastated by deregulation — of that there can be no question. Similarly, deregulation of the banking industry played a significant role in the collapse of the world’s economy in 2008. This video is misleading (to use the polite term.)

Deregulation takes many forms:

* primary among them is the lifting of restrictions on mergers and acquisitions allowing the banks to coalesce into behemoths that are considered TBIF (too big to fail) which, if they were allowed to collapse, would bring down the entire economy. This process leads to monopoly capitalism where the economy is held hostage by a few powerful players. It is hardly a free market.

* The lifting of the ban on usury has, over time, allowed the loaning of money at interest to proliferate. Known as usury in the Bible, the practice of lending money at interest is forbidden by God and was outlawed for millenia by the Christian church and devout Jews. Of the monotheistic religions, today only the Islamic faith is true to God’s commands in this regard.

* Changes to the tax code — another form of deregulation — allows speculation and passive incomes (capital gains) to be treated as regular (or earned) income (the type of income honest working people have.)

* Deregulation has led to the fraud and abuse which has cost millions of honest, hard-working Americans their life savings.

* Deregulation has resulted in bank deposits and savings being subject to confiscation to bail out insolvent institutions — financial institutions which are almost without exception destroyed by theft and ineptitude of corrupt (and inadequately regulated) management. Deceptive practices and outright fraud are now the norm in America’s financial sector.

* Perhaps the most destructive factor in the economic malaise we have faced (and continue to face) is the proliferation of non-productive financial programs and financial instruments. Derivatives, credit default swaps, and any number of other inventions which have no positive value to the economy (in actuality they are counterproductive because they divert money from the productive economy) enable the financial game players to extract huge ‘earnings’ from the real economy — an economy struggling under the weight of the non-productive financial sector.

To say that deregulation has not contributed to the nation’s, and indeed the world’s, financial problems is boilerplate Conservative (neocon) propaganda. It is nothing but cleverly packaged deception — lies, all lies.

Worse, the financial ‘experts’ Corbett cites in this video claim that deregulation has been good for the economy (!!!) This is nonsense, pure and simple. It is unfortunate that James Corbett has bought into this line of reasoning. This and his other videos have evidenced some dangerous thinking, the almost anarchistic view that regulation of the financial sector is the problem, not the solution to our economic woes. Apparently James Corbett does not yet comprehend that the deregulation of the financial sector (Reaganomics) is the root cause of all of our economic woes. The ‘anything goes’ attitude toward the banks and the financial sector is the cause of our problems. We certainly do not need more of the same.

The expansion of the financial sector in general is the problem. Parasites (financiers, bankers, speculators) suck the life-blood out of the productive economy. A privileged few live lives of luxury while those who actually work for a living suffer oppression and exploitation. The parasitic financial sector does not merely need to be regulated … it needs to be eliminated. I think the correct term would be ‘extirpated’ — pulled up by the roots.

You can quote me on that.

(chs 06-19-2017 23:21 -0500)