PRESS RELEASE
New Broadsides for Glass-Steagall Published
June 9, 2017 (EIRNS)—"President Trump: Do You Want Glass- Steagall or Another Economic Meltdown?" is the title of a comprehensive open letter to the President by author and former investment banker Nomi Prins, published on TruthOut today and on several other widely-read sites. Prins has met with many Members of Congress and staff for Glass-Steagall since April, and will continue doing so. The House passage of the so-called "Financial CHOICE" bank deregulation bill, because it will not move in the Senate, has not ended but only intensified the debate involving Glass-Steagall reinstatement.
Prins’s letter to the President includes a thorough history of the Glass-Steagall Act’s passage and long success, and details how "For the first time since its repeal, a return to the Glass-Steagall Act [has] bipartisan support." But
"The division and the as-yet unresolved nature of the Trump administration response to the Glass-Steagall question could, in the face of another financial crisis, come back to haunt us all, if it translates into more bailouts and systemic failures."
Showing the 2007-08 financial panic a direct consequence of the elimination of Glass-Steagall, Prins writes: "In the fall of 2007, that system finally started buckling because of the problems of Citigroup, not because of the investment banks, which would not have been covered by Glass-Steagall. The catastrophe that hit Citigroup makes it clear just how crucial the repeal of that act was to the financial meltdown to come.... And Citigroup wasn’t alone. Federal Reserve Chairman Ben Bernanke would later testify that, by 2008, 11 out of the 12 biggest commercial banks were "insolvent" and had to be bailed out. The entire banking system was rotten to the core and the massive buildup of bad paper, high leverage, and speculative bets (derivatives) that made disaster inevitable can be traced directly back to the repeal of Glass-Steagall.
"Today, a fresh bubble is inflating. This time, it’s not U.S. subprime mortgages at the heart of a budding banking crisis, but $51 trillion in corporate debt in the form of bonds, loans, and related derivatives. The credit ratings agency S&P Global Ratings has predicted that such debt could rise to $75 trillion by 2020 and the defaults on it are starting to increase in pace. Banks have profited by the short-term creation and trading of this corporate debt, propagating even greater risk. Should that bubble burst, it could make the subprime mortgage bubble of 2007 look like a relatively small-scale event."
In another broadside, former Reagan Administration Assistant Treasury Secretary Paul Craig Roberts writes today, "Without Glass-Steagall America Will Fail." Roberts notes,
"What we can say about the repeal of Glass-Steagall is that it turned a somewhat egalitarian democracy with a large middle class into the One Percent vs. the 99 percent. The repeal resulted in the destruction of the United States as an open, prosperous society. The electorate is very much aware of the decline in their economic situation, and this awareness expressed itself in the last presidential election."
And further, "the repeal of Glass-Steagall forced the 99 percent to bail out the One Percent."
"The question before Congress today," Roberts writes,
"is whether they will take the country down for the sake of campaign contributions ... or will they take personal risks to save the country."
