General Electric has become the biggest beneficiary of one of the rescue programs originally designed for banks, according to the Washington Post. However, GE has also managed to avoid the restrictions and regulations placed upon the financial institutions by exploiting a loophole in the rescue program, and claiming two small Utah banking institutions qualified it for government (read: taxpayer money) assistance.
Now, President Obama wants to close that loophole and reaffirm the wall between banking and commerce. Hopefully, some of that plan will include a new Glass-Steagall, an act originally introduced in 1933 during the first American economic apocalypse. Glass-Steagall was designed to separate commercial from investment banking, which is an important safeguard to keep banks from getting "too big to fail."
Senator Phil Gramm (R-TX) and House Representative Jim Leach (R-IA) introduced a bill to repeal Glass-Steagall in 1999. It passed the Senate and the House, and President Clinton signed the legislation into law. It was a major victory for deregulation and corporations that value rapid, unchecked growth over responsibility and long-term stability.
The government had let a cougar out of its cage and then had the nerve to act surprised when they got mauled. The banks (and a select few corporations) got "too big to fail," and the taxpayers are now endlessly bailing them out.
If President Obama is serious about regulation, he needs to go beyond this single loophole and get tough with banks and corporations. Glass-Steagall II could control bank growth, but corporations need their own regulation overhaul.
Corporations have more power than individuals and yet are protected as individuals by the law. Though they exert unusual influence on the government with their army of lobbyists, 10,000 Political Action Committees, and placement of executives in high-ranking government positions (see: Hank Paulson,) corporations simultaneously use the Constitution to protect themselves from liability.
Barry Yeoman reports in Mother Jones that the 1978 Supreme Court agreed with corporations claiming that
[T]he state could not limit their political spending in an antitax campaign. Almost two decades later, a federal appellate court struck down a Vermont law requiring that milk from cows treated with bovine growth hormone be so labeled. Dairy producers had a First Amendment right " not to speak," the court said. In California, Nike invoked the First Amendment to fight a lawsuit arguing that the company's public relations materials misrepresented sweatshop labor conditions.
Most recently, the Retail Industry Leaders Association has relied on the 14th Amendment's equal protection clause to fight Maryland's Wal-Mart law, designed to force the company to expand its spending on employee health care. The retail group has also sued Suffolk County, New York, which last fall passed a similar ordinance aimed at nonunionized supermarkets.
Factor in the billions of dollars corporations save with their tax breaks, tax havens, and abandonment of union contracts for the sake of cheap labor in foreign countries, and the message becomes pretty clear: the US loves the corporation. Yet, this kind of fondness for corporations isn't reciprocal for you, the taxpayer, who inevitably rushes in to save the day when the corporation goes bankrupt after years of deregulation and over-leveraging.
If you go bankrupt, you're out of luck. GE and President Obama probably won't rush to the rescue and spend their money on your hard luck, even if your hard luck was caused by a corporation (as happened to victims of 400% payday loan interest rates.)
Obama's closing of the rescue plan loophole is a good step, but it's only one step. The US government needs to make up for years of deregulation and corporatism in order to protect Americans from corporate behemoths that are accountable to no one (including their own employees), leaches on taxpayers' wallets, and an inevitable burden on the economy when they go broke and demand their bailouts.
Cross-posted from Allison Kilkenny's blog. Also available on Facebook and Twitter.