May 4th, 2014
in Op Ed
Released Clinton Library Documents Contain Chilling Comment
by Larry Doyle, Sense on Cents
I do not think there is any single piece of legislation in the last 50 years that has had such a profoundly detrimental impact on the American public than the repeal of the Glass-Steagall Act separating commercial and investment banking.
That repeal is certainly not the sole factor that led to the economic crisis of 2008 and the ongoing pain we experience today, but it was certainly critical to the eventual meltdown. There is no great revelation in that assessment.
The recent release of documents from the Clinton Presidential Library provides real transparency on the dynamic at play back in the mid to late '90s that led to the eventual dismantling of Glass-Steagall. Perhaps no surprise that we have yet to see meaningful review of these documents from media outlets on our side of the pond, but the UK-based The Guardian hits these revealing documents hard.
Not that we did not already know that the Clinton administration ushered in the repeal of Glass-Steagall, but we learn some fascinating facts in reviewing both some of the documents and The Guardian's commentary. Let's navigate and see who was really calling the shots:
Wall Street deregulation, blamed for deepening the banking crisis, was aggressively pushed by advisers to Bill Clinton who have also been at the heart of current White House policy-making, according to newly disclosed documents from his presidential library.
The previously restricted papers reveal two separate attempts, in 1995 and 1997, to hurry Clinton into supporting a repeal of the Depression-era Glass Steagall Act and allow investment banks, insurers and retail banks to merge.
The White House papers show only limited discussion of the risks of such deregulation . . . Earlier, in February 1995, newly-appointed Treasury secretary Robert Rubin, his deputy Bo Cutter and senior advisers including John Podesta gave the president three days to decide whether to back a repeal of Glass-Steagall.
Podesta currently works at the White House as special adviser to President Barack Obama. Sperling stood down as director of Obama's National Economic Council last month.
Along with Cutter, who worked on Obama's transition committee, all three men were close allies of Rubin, who spearheaded the deregulation of Wall Street before joining the board of Citigroup in 1999. In 2007, he briefly became its chairman.
The closeness of Obama's team to the deregulation policies of the late 1990s is well known and has been criticised by campaigners as a reason for the current administration's reluctance to institute more aggressive Wall Street reforms after the banking crash.
But the new documents cast fresh light on the way the White House was first ushered toward deregulation by the tight group of Rubin allies.
A similar apparent attempt to rush president Clinton's decision-making occurred later in the process, in 1997.
In a letter received by the president on 19 May, Clinton is again given just three days to decide whether to proceed with the deregulation agenda.
While Rubin, Podesta, Sperling, Cutter et al were clearly doing the ultimate bidding of their Wall Street cronies as this repeal worked its way through Congress, a review of a document dated September 22, 1998 is chilling in highlighting one specific point in regard to the repeal of this act:
There is no good reason for doing this. It does not help safety and soundness, and is not necessary for functional regulation.
If in fact there was "no good reason for doing this" - and history has certainly proven that to be an accurate assessment - then how much dough-re-me went into the pockets and campaign coffers of Clinton and others to see that Glass-Steagall was repealed? We know Rubin himself was paid over $100 million by Citigroup.
Is there any doubt that our nation would be far better off if Glass-Steagall had never been repealed? I have no doubt about that, which is why I am a strong proponent that it be reinstated and we break up the large Wall Street banks in the process.