Let's give credit where credit is due, shall we?

[Jeff In Milwaukee]

This Monday's 500 point collapse of the financial markets -- which equates to tens of billions of dollars in lost equity worldwide -- would not have occurred were it not for the repeal of the 1933 Glass-Steagall Act, which preventing banks from putting their money in the stock market. After the stock market crash of 1929, this seemed like a reasonable piece of legislation.

That was until 1999, when John McCain's economic advisor, Phil Gramm, authored the Gramm-Leach-Bliley Act, which effectively repealed Glass-Steagall and allowed the unrestricted cross pollination of banking and investing. So banks could loan themselves money to invest in otherwise worthless stocks. During the golden days of the Clinton Administration, this seemed like a license to print money.

Let's hear from Phil Gramm in his own words. This is an actual press release from the Senate Banking Committee in 1999:

How will people judge whether we were successful in passing this bill today? My test is, What are we trying to do in the bill? Are we trying to benefit banks or insurance companies or securities companies, or are we trying to benefit consumers and workers?

Call my cynical, but I'd say you were pretty much trying to benefit the banks, insurance companies, and securities companies. But if you were ALSO trying to single-handedly ruin the U.S. financial markets, then I'd offer a toast to a job well done.

I believe today we are changing financial services in America to reflect that we do have a new century coming and we have an opportunity to dominate that century the way America dominated the last century.

That is, if the Chinese don't call our loans first...

This is a deregulatory bill. I believe that is going to be the wave of the future. Although this bill will be changed many times, and changed dramatically as we expand freedom and opportunity, I do not believe it will be repealed. It sets the foundation for the future, and that will be the test.

First came the S&L debacle from deregulation, then came the dot.com bubble because of deregulation, then the energy pirates of Enron because of deregulation, now the financial market meltdown because of deregulation. And that doesn't count the ongoing psycho-drama that is the airline industry.

So at what point, my friends, are the American people going to wake up the the idea that if left to their own devices, markets and industries will commit fiscal-suicide in the pursuit of profits. As what point will we decide that industries and markets, while they may be owned by private individuals and shareholders, exist to serve the public and not the reverse?

Just asking.

[gateley]

1. Would we be in this mess (regardless of all of the repealed bills) if we hadn't

gone into Iraq? Is that what started the whole downward plunge?

[crazylikafox]

No, it really is about the deregulation and the housing crisis

The Iraq war just makes it a whole lot worse

[gateley]

9. Thanks - I always wondered if it was the beginning of all of this. Now I'll

stop saying that! :7

[Jeff In Milwaukee]

4. Iraq has nothing to do with it...

In direct answer to your question -- this would have happened regardless of our foreign policy. The resulting disaster was baked into the cake back in 1999.

[melody]

2. That's kind of like blaming the last straw on the camel's back for the entire collapse

[Jeff In Milwaukee]

3. Exactly the opposite...

This was the first straw. Critics at the time pretty much predicted that this would be the result -- mostly because it's precisely what happened in 1929. The rest of the abuses would not have been possible without Gramm-Leach-Bliley.

[melody]

5. Good grief, work with the damned metaphor -- you're blaming ONE element

There were many, many others ... all GOP.

[Jeff In Milwaukee]

6. That's like blaming the mining industry

for a gunshot wound.

Yes, there were other elements in play. But Gramm-Leach-Bliley is the one that made the rest of them possible.

[melody]

7. I'm saying Greenspan and Gramm were the two primary elements n/t

[Jeff In Milwaukee]

10. Greenspan is definitely a co-conspirator in this...

Worst Fed Chairman Ever. I don't believe history will judge his tenure very kindly.

[bridgit]

8. From Robert Reich's blog, Feb 29, 2008 - American Finance: From Deregulation to Govt Ownership...

...in One Fell Swoop

A delegation from the U.S. Treasury Department met recently with a few of the world's largest sovereign wealth funds. They want to avoid a political firestorm as more and more foreign investment makes its way into the U.S. economy.

What's this all about, really?

Over the past thirty years, the U.S. government has dismantled the system of regulation the nation instituted to prevent the sort of wild speculation that preceded the financial meltdown of the Great Depression. The last piece to fall was known as the Glass-Steagall Act, a Depression-era firewall intended to separate commercial banking from investment banking. In the late 1990s, my cabinet colleague Bob Rubin joined Fed chair Alan Greenspan to get Congress to repeal Glass-Steagall.

It's the biggest irony in financial history. Decades of U.S. government deregulation of Wall Street has reaped a whirlwind of irresponsible speculation. It's now ending in a financial meltdown that's being remedied by government ownership, with all the strings that come with government ownership. And it's not even OUR government that's holding the strings.

http://robertreich.blogspot.com/2008_02_01_archive.html

On Hartman this afternoon, he was bringing out Lyndon Johnson's involvement in the demise of Glass-Steagall as a way to, it was hoped; balance the books that went whack as a result of the Vietnam war. But the usual suspects are everywhere: James Baker III, KBR, war, industrial/financial gambling, graft, etc...

Endeavoring to set lone star politicians and human greed in general to the side for a moment; it would seem that war, and cooking the books as a means of funding useless, unprovoked wars is *not* in America's best interests.