WHO OWNS YOUR GOVERNMENT?

This is a column to illustrate whether your government does its best to provide a stable economy for the average American citizen, or whether it represents the fat cats who spend the big bucks. You decide.
Following the crash of 1929, one of every five banks in America failed, and their depositors were completely wiped out. In 1933, the Glass-Steagall Act was passed in an attempt to prevent this ever happening again. The law prevented banks from underwriting either debt or equity securities, or owning insurance companies. Thus, they had to choose between being a deposit/lending institution, or a Wall Street financier. In 1956, under the President called “do nothing” Eisenhower, Congress passed the Bank Holding Company Act, stating that a holding company owning two or more banks could not engage in the securities or insurance business either.
Shortly thereafter, in the 60s, banks began to lobby Congress to let them slip into the municipal bond market, underwriting debt securities for cities. In 1986, the Federal Reserve Board, which regulates banks, re-interpreted Section 20 of the Act, which prevents banks from being engaged in securities, to allow up to 5% of their revenue to come from securities transactions. They also allowed Bankers Trust, a bank, to engage in commercial paper (unsecured short term business loans.) We should note here the “independent” Reserve Board was formulated by financiers and established by Congress in 1913, to control our money supply. It is a totally private corporation owned by the banks.
In 1987, over the objections of Chairman Paul Volcker, the board voted 3-2 in favor of proposals from Citicorp, J. P. Morgan and the aforementioned Bankers Trust to allow these banks to handle commercial paper as described above; and to underwrite revenue bonds and mortgage backed securities (the instrument which so recently wrecked the housing market and the whole economy). Chairman Volcker warned that banks would likely lower loan standards in pursuit of lucrative security offerings, and market bad loans to the public.
In March 1987, the Fed allowed Chase Manhattan Bank to enter the commercial paper market. It also stated it planned to raise the 5% securities revenue limit to a 10% limit. In August 1987, Alan Greenspan, a former Director at J. P. Morgan, was named to replace Volcker as Fed Chairman. Most of the world considered him a financial genius, but only until the crash of 2008-9.
In January 1989, the Fed voted to allow banks into both corporate debt and equity securities, and raised the revenue limit to 10%. All during the 80s and 90s, Congress debated legislation to repeal Glass-Steagall, but always failed to act. In 1996, with the support of Greenspan, the Fed raised the bank securities revenue limit to 25%. About the only teeth left in Glass-Steagall was preventing banks from entering the insurance business. In 1997, the Fed gave banks the right to buy and own securities firms outright. Bankers Trust started it by buying Alex Brown, a brokerage firm.
In fall of 1997, Sandy Weill, chairman of Travelers Insurance, tried to merge with J. P. Morgan, but failed. He then bought Salomon Smith Barney, a brokerage firm, and then proposed a merger with Citigroup, owner of Citibank. This was clearly a violation of what was left of Glass-Steagall, because it involved an insurance company.
Greenspan, with the support of President Bill Clinton and his Treasury Secretary Robert Rubin, leads the Fed to approve this merger which clearly violates the law. In order to protect us (what a ruse), Greenspan says that unless Congress repeals Glass-Steagall within 2 years, the merger will have to unwind. Deep within the Regs was the possibility of three additional 1 year extensions to Weill which could be provided by the Fed. Just days after announcing the administration would support the repeal, Treasury Secretary Robert Rubin, who had previously been Chairman of Goldman-Sachs investment firm, left the administration to take a top executive post at Citigroup, under Sandy Weill.
In the 1997-98 election cycle, the finance, insurance and real estate industry spends $200 million on lobbying, Citibank alone spent $100 million. The industry spent another $150 million on campaign contributions. And on November 4, 1999, Glass-Steagall is finally repealed, less than 2 years after the merger. Remember the mortgage debacle which started in 2007? Remember the crash of our economy? Remember Paul Volcker’s warning? You decide who Congress was representing.