Robert Barwick  CEC

Let-off Wall Street crooks strike again

 

Citigroup, JPMorgan Chase and the other apex predators of Wall Street have got their paid hacks in the US Congress to repeal a banking regulation that forbade banks that hold government-insured deposits from gambling in derivatives.

 

Proving that the banks are like out-of-control ice-addicts desperate for their next derivatives hit, they used their political clout to attach to an important spending bill, without which the US government would have shut down this Thursday, a provision repealing a rule in the Dodd-Frank Act entitled "Prohibition Against Federal Government Bail-outs of Swaps Entities".

 

The rule forbade banks that hold deposits insured by the Federal Deposit Insurance Corporation (FDIC) from entering into swaps agreements, i.e. derivatives, for so-called "hedging", so that if those bets went bad, the government wouldn't be forced to step in and bail the bank out in order to save the deposits.

 

It was one of the few provisions in the 2010 Dodd-Frank Act which sought to copy at least the spirit of the Glass-Steagall Act 1933's separation of normal commercial banking from speculative investment banking; otherwise the 8000-page Dodd-Frank Act was a gift to corporate lawyers shamelessly intended by Wall Street stooge Obama to ensure there wouldn't be a return to Glass-Steagall (which in just 35 pages had managed to stop any bank failures in the US for 66 years).

 

True to their nature, Wall Street's bankers—many of whom should be in jail—have used their immense political clout to scrap this one effective provision that would stop them from gambling with other people's money with a government guarantee. And they held the entire United States to ransom to do so, by attaching the provision—which was drafted by lawyers for Citigroup—to a so-called omnibus spending bill which was necessary to pass before the US government ran out of money on 18 December. It was extortion: if Congressmen who opposed scrapping the derivatives rule wished to vote against it, they would have to vote against the entire bill, and risk shutting down the government.

 

Senator Elizabeth Warren, who is co-sponsor of the 21st Century Glass-Steagall Bill , gave an emphatic speech on 12 December in which she ripped into both Congress and Wall Street. Singling out Citigroup, Warren blasted, "So let me say this to anyone who is listening at Citi[group]. I agree with you Dodd-Frank isn't perfect. It should have broken you into pieces!"

                                                                       

This saga underscores the shamelessly corrupt nature of the too big to fail banks and their sway over governments; it is the same corruption on display in the UK Parliament's 2013 passage of their pathetic ring-fencing law instead of Glass-Steagall, and in Australia in Hockey's appointment of a banker to run his Financial System Inquiry, and his government's watering down of financial advice laws under orders from the big banks.

 

 

This has to be seen as criminal, and fought accordingly, by the public demanding the only effective law that would root it out: a full Glass-Steagall separation of banking.

Click here to watch Senator Elizabeth Warren's 10 minute speech.