The U.S. Federal Reserve announced yesterday that banks covered by section 619 of the Dodd-Frank act will not have to be in full compliance until July 2015. The rule – broadly known as the Volcker Rule, and named after former Fed Chairman, who is its principle proponent – bars banks who are covered by government backstops from conducting speculative trading operations with depositors’ money.
This is to permit the various lobby groups and associations funded by the banks to mount an assault on the Volcker Rule in court before any of the positions that would technically be in contravention of the rule as of today need be unwound. This in turn is in full expectation by the duplicitous banks and regulators that the key foundations of the rule will, in fact, be thrown out in court by an equally duplicitous justice system.
The larger context within which the Volcker Rule exists is the Dodd-Frank act, but the fact that we are even needing a Dodd-Frank act to save us from the predatory character of major financial institutions a result of the repeal of the Glass-Steagal act in the form of the passage of the Gramm-Leach-Blilely Act in 1999.
If you’re confused, you’re supposed to be. At least, a student of the interrelationship among congress and the financial services and banking sector since J.P. Morgan first hung out a shingle would certainly lead one to conclude that, rather than retain the same title of laws governing essentially the same activities, they like to create new laws with new names to obscure the passage of repeal and reinstatement that is the neurotic legacy of banking rules in America.
This latest tactic by the Fed – implementing a new set of rules and on the same day they take effect, announce what equates to a moratorium on the rule for a year and a half so the omnipotent banking lobby can generate thousands of pages in briefs and arguments challenging the rules’ fairness, applicability, or jurisdiction – is a new arrow in the U.S. Federal Government’s quiver of dis-regulation. But the pattern is apparent.
Remembering 1929 and 2008
Despite the pithy misinformation to the contrary, the market crash of 2008 was equal in severity to that of 1929. The only difference is, that the decades of fantasy, doublespeak, larceny and market manipulation on the part of government and banking sector since 1929 ameliorated the expectations of the general public so that we accept with only the mildest of objection the tremendous and unprecedented fabrication of capital and credit that offset the multi-year stagnation of the economy in a state of abject poverty.
That in tandem with the Rise of the Individual has engendered a culturally imbued self-absorption that precludes the ability or willingness of the general public to regard events external to their immediate environments with anything but passing interest. Thus, video games, movies, sports, television, and in the more recent generations, tatoos, piercings, and musically derived tribal identities have become the general anesthetics of popular culture, and rendered us incapable of a coordinated and sustaining outrage that would surely have been the public’s reaction to the absence of prosecution of the perpetrators of the 2008 version of the Great Financial Debacle if it were 1929.
Post 1929 – 1932, to be precise – the government response to the growing public clamour for some form of punishment as the misery of a crippled economy continued to fuel broad social unrest , was the Glass-Steagall act, which itself became a subset of the Banking Act of 1933. These two senators sponsored a bill that would prevent a bank from becoming a brokerage and having the ability to risk its depositors equity in the legal casino of the stock market. Thus, the separation between a commercial bank and an investment bank was born. And it worked very well, in terms of protecting the financial system from violent seizures, and the government from needing to use taxpayer dollars to socialize the investment bankers’ mistakes/greed/stupidity/brashness.
But then in the sixties, things got a bit murky.
According to Wikipedia:
Starting in the early 1960s federal banking regulators interpreted provisions of the Glass–Steagall Act to permit commercial banks and especially commercial bank affiliates to engage in an expanding list and volume of securities activities.[5] By the time the affiliation restrictions in the Glass–Steagall Act were repealed through the GLBA, many commentators argued Glass–Steagall was already “dead.” Most notably, Citibank’s 1998 affiliation with Salomon Smith Barney, one of the largest US securities firms, was permitted under the Federal Reserve Board’s then existing interpretation of the Glass–Steagall Act. President Bill Clinton publicly declared “the Glass–Steagall law is no longer appropriate.
And throughout the 80′s and 90′s, one of the earliest examples of un-enforcement of laws manifested itself as banks and brokerages began to merge with one another. Instead of enforcing the provisions of the Glass-Steagall section of the Banking Act of 1933, paid shill after paid shill (among them U.S. presidents, Treasury secretaries, and Federal Reserve members) took to the soap box to proclaim that the Glass-Steagall act was “unworkable” and “obsolete”. Why, even Bill Clinton dutifully clambered up there and designated the enforced separation of banks and brokerages unworkable.
So, the GLBA referenced above is the Gramm-Leach-Blilely Act of 1999, which repealed the Glass-Steagall provisions of the Banking Act, and suddenly it was okay for banks to be both banks and brokerages, and VOILA! Once again you have the gamblers ability to leverage up on risk using U.S. taxpayer dollars. What happens next is the subject of ongoing and intensifying chicanery among central banks, financial institutions at the top of the economic food chain, and our now obviously and (I hope you can’t find any fault with the categorization) criminally duplicitous government of the United States of America, and the U.S. Federal Reserve Bank. (Which in reality, is a branch of government, technicalities notwithstanding.
So don’t be surprised that the temerity of the largest criminal enterprise in the history of the world now exists so confidently in broad daylight that the taking with one hand while giving back with the other is a matter for tandem press releases by the agency who acts as banker to the enterprise. Rather, expect more of the same.
