Hillary Clinton Is Whitewashing the Financial Catastrophe

[dogknob]

 She has a plan that she claims will reform Wall Street—but she’s deflecting responsibility from old friends and donors in the industry.

http://www.thenation.com/article/hillary-clinton-is-whitewashing-the-financial-catastrophe/

 Candidate Clinton is essentially whitewashing the financial catastrophe. She has produced a clumsy rewrite of what caused the 2008 collapse, one that conveniently leaves her husband out of the story. He was the president who legislated the predicate for Wall Street’s meltdown. Hillary Clinton’s redefinition of the reform problem deflects the blame from Wall Street’s most powerful institutions, like JPMorgan Chase and Goldman Sachs, and instead fingers less celebrated players that failed. In roundabout fashion, Hillary Clinton sounds like she is assuring old friends and donors in the financial sector that, if she becomes president, she will not come after them.

The seminal event that sowed financial disaster was the repeal of the New Deal’s Glass-Steagall Act of 1933, which had separated banking into different realms: investment banks, which organize capital investors for risk-taking ventures; and deposit-holding banks, which serve people as borrowers and lenders. That law’s repeal, a great victory for Wall Street, was delivered by Bill Clinton in 1999, assisted by the Federal Reserve and the financial sector’s armies of lobbyists. The “universal banking model” was saluted as a modernizing reform that liberated traditional banks to participate directly and indirectly in long-prohibited and vastly more profitable risk-taking.

Exotic financial instruments like derivatives and credit-default swaps flourished, enabling old-line bankers to share in the fun and profit on an awesome scale. The banks invented “guarantees” against loss and sold them to both companies and market players. The fast-expanding financial sector claimed a larger and larger share of the economy (and still does) at the expense of the real economy of producers and consumers. The interconnectedness across market sectors created the illusion of safety. When illusions failed, these connected guarantees became the dragnet that drove panic in every direction. Ultimately, the federal government had to rescue everyone, foreign and domestic, to stop the bleeding.

Yet Hillary Clinton asserts in her Times op-ed that repeal of Glass-Steagall had nothing to do with it. She claims that Glass-Steagall would not have limited the reckless behavior of institutions like Lehman Brothers or insurance giant AIG, which were not traditional banks. Her argument amounts to facile evasion that ignores the interconnected exposures. The Federal Reserve spent $180 billion bailing out AIG so AIG could pay back Goldman Sachs and other banks. If the Fed hadn’t acted and had allowed AIG to fail, the banks would have gone down too.

More at link: http://www.thenation.com/article/hillary-clinton-is-whitewashing-the-financial-catastrophe/

[misterhighwasted]

1. No she is not. Someone's opinion says..

Meh

[Thinkingabout]

2. Reinstating Glass Stegall which would not have prevented the finanical crisis would be a return to

act which would not have prevented the financial crisis. The passing of the Commodities Futures Modernization Act of 2000 which arrived on Bill Clinton's desk by a veto proof vote from Congress. One of the voters was Sanders.

Since then the Dodd Frank bill has been enacted and Hillary wants to use the Dodd Frank bill along with the Volker Rule would curb the financial crisis of 2008. If the banks failed under the Dodd Frank and Volker Rule they would be broken up.