President Obama should propose that the nation's biggest banks be broken up and their size capped, and that the Glass-Steagall Act be resurrected.
It's good policy, and it would smoke out Mitt Romney as being of, by, and for Wall Street -- and not on the side of average Americans.
It would also remind America that five years ago Wall Street's excesses almost ruined the economy. Bankers, hedge-fund managers, and private-equity traders speculated on the upside, then shorted on the downside -- in a vast zero-sum game that resulted in the largest transfer of wealth from average Americans to financial elites ever witnessed in this nation's history.
Most of us lost big -- including over $7 trillion of home values, a $700-billion-dollar bailout of Wall Street, and continuing high unemployment.
But the top 1 percent have done just fine. In the first year of the recovery they reaped 93 percent of the gains. The latest data show them back with 20 to 25 percent of the nation's total income -- just where they were in 2007.
The stock market has about caught up to where it was before the crash. The pay and bonuses on the Street are once again sky-high. So are the pay and perks of top corporate executives. The Forbes list of richest Americans contains more billionaires than ever.
And the tax rates of the top 1 percent are lower than ever -- courtesy of their armies of lobbyists.
Mitt Romney, private equity manager and financier -- well within the top one-tenth of 1 percent, collecting more than $20 million a year yet paying 14 percent in taxes because of tax preferences for capital gains and for private-equity -- is the avatar for all that's happened.
Just like the rest of the Street, Romney used other peoples' money to make big bets, leveraging like mad, pumping and then dumping companies regardless of the human costs.
Worse, Romney wants to cut taxes even further on the top 1 percent -- giving them them lion's share of a $4.7 trillion tax cut -- while shredding safety nets the rest of us rely on.
And he wants to repeal the Dodd-Frank Act that goes some way to preventing the worst excesses of the Street.
And this man has an almost 50-50 chance of becoming president?
The President should counter Romney's extraordinary solicitude toward the Street with a proposal to cap the size of the nation's biggest banks so that no bank is ever again too big to fail. And to resurrect the Glass-Steagall Act, which once separated commercial from investment banking.
In the 1980s the ten biggest banks had less than 30 percent of bank depositary assets. Now they have 54 percent. And the four biggest now dominate the Street almost completely. Because lenders and investors know they're too big to fail, the four biggest banks have a competitive advantage over smaller rivals that pose larger financial risks. That means they'll only get bigger.
Breaking up the biggest banks and capping the size of all banks is hardly a radical suggestion these days. The Dallas Federal Reserve Board, which has never been accused of excessive liberalism, has called for it. So has Sanford Weill, the creator of Citigroup, one of the biggest of the big. So has Daniel Tarullo, the Federal Reserve governor charged with bank regulation. So have conservative commentators such as George Will.
It's not too late for the President to advocate these measures. In fact, now may be the perfect time. Besides, it's not as if Wall Street is going to pour campaign contributions into Obama's coffers anyway; the Street is going with Mitt.
Calling for a breakup of the biggest banks and a resurrection of Glass Steagall would smoke out Mitt Romney -- revealing clearly and decisively he's not on the side of most Americans.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage," now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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 |
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| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
much of a difference as we are in the home stretch. Do something bold! Go for the Hail Mary!
You got nothing to loose only a lot to gain!
I was a (minor) officer in a major NY bank twice: 1986 - 1990, and again 1998 - 2000. The term "to big to fail" was common in office conversations. In retrospect, I am not sure if this was due to arrogance and bravado, or to the realization by the directors that the government would always bail them out. I agree that the banks teed to be broken up and regulated.
Just to qualify myself, I left both times voluntarily and on good terms. I am not a disgruntled employee.
Dodd-Frank has to be repealed, but there need to be an incentive for banks to breakup and solve the too-big-to-fail issue. My view is that if a financial institution has assets over a certain level, say $100 billion, additional assets must be financed by equity. This would break the banks by their own volition, make them focus on their return on assets and make them look closer to their risks, as for sure they wouldn't be bailed out. Under that framework, we only would need the FDIC.
:-D
We don't prosecute them, we leave them alone.
The one percent don't attack each other. It's the unwritten rule.
Big banks have so many customers, that they are unable to move money between accounts in real time. That's one of the reasons that they are able to justify interest rates on credit cards and fees on money transfers.
Even though modern computing architectures like those used at Google and Amazon are based on massively parallel small computers like PCs working in gigantic clusters called clouds, the big banks are really behind-the-times and still use mainframes. For that reason, they move money between accounts in smaller computers, then once or twice a day they perform "BATCHES" to balance all their accounts with the mainframe database. See the transactions here http://define.com/checking_accounts and notice the times between when the transactions are initiated and when they are completed. The difference between these times is called "THE FLOAT."
If people were willing to use credit and debit cards instead of cash, we could consolidate the banks into a NONPROFIT and have a banking system WITHOUT THE FLOAT and WITHOUT FEES and INTEREST RATES. This banking model would use modern computing architectures and would enable the INSTANTANEOUS transfer of funds between any two accounts anywhere on Earth.
If when a store charged your credit card, the transaction INSTANTANEOUSLY APPEARED ONLINE on your bank account web page, you'd begin to wonder why the bank charges you an interest rate, since the transaction is entirely automated and costs nothing but electricity for the bank. If we migrated to a CLOUD COMPUTING MODEL for our banking system, and turned over the transaction processing to computer experts like those who work for Amazon and Google, we would see that our electronic transactions are fully automated and cost nothing to conduct.
Once you eliminate the CASH and CHECKS, you no longer need TELLERS in banks. That means that you no longer need VAULTS. If you don't need TELLERS and VAULTS, then you don't need brick and mortar BANKS. If you use a DEBIT CARD and a CREDIT CARD instead of cash, then you don't need ATM MACHINES. So, by eliminating CASH and CHECKS and moving towards a completely electronic banking model, you don't need PHYSICAL BANKS. It's all online and conducted through the little machines that swipe your credit cards at the retailer.
What about RISK? Banks no longer use human beings to assess RISK. Now, RISK is assessed using formulas and programs called EXPERT SYSTEMS that analyze your CREDIT REPORT. The assessment of RISK is entirely automated.
Otherwise, it won't make much of a difference if either one of these politicians are elected.
It's amazing to see how the culture of America is changing into this idea of accepting a two-tier society where if you're TBTF you are allowed to defraud the public, get bailed out by government.
Everyone else is just a serf drowning in student loan debt or flippin' pizzas at Domino's.
Don't expect either party to get behind that as they are both hopelessly corrupt and owned by Wall Street. The only parties we have left are "us" and THEM. Get over it.