Dumb Headline of the Day: “War on Wall Street”
I had to do a double-take when I saw this headline on the Bloomberg news service this morning:
War on Wall Street as Congress Sees Returning to Glass-Steagall
“A one-page proposal gaining traction in Congress could turn back the clock on Wall Street 10 years, forcing the breakup of banks, including Citigroup Inc. Lawmakers in both parties, seeking to prevent future financial crises while soothing public anger over bailouts and bonuses, are turning to an approach that’s both simple and transformative: re-imposing sections of the 1933 Glass-Steagall Act that separated commercial and investment banking.”
How exactly is this a “War on Wall Street?”
The 1933 Glass-Steagall Act was designed to prevent a Wall Street catastrophe from spilling over into the real economy. For 65 years, it did just that. And thanks to Gram & Co., it was repealed just in time for the crisis to erupt.
Nice work.
Undoing one of the factors that made the impact of the crisis much worse is hardly a “War on Wall Street.” Putting this law back on the books is prudent, and long overdue.
Note: That hedline is a quote from former Fed Governor Lyle Gramley. Perhaps its a Bloomberg style requirement not to use quotes in hedlines, but it changes the information communicated by omitting them.
One suggestion for Bloomberg hedline writers is to use quotes when quoting. Your hedline should have read:
“War on Wall Street” as Congress Sees Returning to Glass-Steagall
It communicates far more effectively with rather than without . . .
>
Source:
War on Wall Street as Congress Sees Returning to Glass-Steagall
Alison Vekshin and James Sterngold
Bloomberg, Dec. 28 2009
http://www.bloomberg.com/apps/news?pid=20601109&sid=aeQNTmo2vHpo&pos=10
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December 28th, 2009 at 8:17 am
Talk about TALKING YOUR BOOK — this lawyer has no idea WTF he is saying, other than reinstating Glass Steagall will hurt his business.
What a tool.
December 28th, 2009 at 9:20 am
A new battle cry of the same ilk as “Class Warfare” and by the same people.
December 28th, 2009 at 9:24 am
I hope it’s a real war — with shooting, and bombs and stuff. Otherwise, everyone who feels unjustly put-upon should just STFU and stop using the stupid war analogy.
December 28th, 2009 at 9:34 am
It is to them, and they’re all that matter, dontcha know?
December 28th, 2009 at 9:36 am
MA – dumb post .. me thinks your not the type to go there …. but if you knew it was coming would you short the firms getting the disaster capit ‘ism treatment?
… that treament is what started this whole mess .. that and contract law* being a thing of the past
* promises on paper
December 28th, 2009 at 9:43 am
It’s important to remember that the “Co.” in that quote included the likes of Bill Clinton, Robert Rubin and Al Gore. From the GLBA Wiki:
It’s important to remember that Democrats are as culpable as Republicans in the repeal of Glass-Steagall and the rest of the regulatory collapse that has occurred over the last 3 decades.
It’s important to remember that for the simple reason it shows just how risible is the notion that this current crop of DLC pukes are going to reinstate Glass-Steagall or any other policy that might lower the profits of their bankster buddies.
Obama, Geithner, Bernake, Reid, Dodd, Frank, etc coming down on Blankfein, Pandit, Dimon, etc ?
Please.
Ain’t gonna happen people.
Just sayin…
December 28th, 2009 at 9:43 am
“headline”
December 28th, 2009 at 9:55 am
Every letter/fax to my representation (R-Johnson,R-Hutchinson,R-Cornyn) has included four bullet points in addition to the point of the communication. GlassSteagall is one of them. Prosecutions is another. Congress is likely posturing for 2010 elections, so I will believe it when I see it. But if it happens, it has to start somewhere.
Ironic that the best thing Congress can do four our country is to un-legislate their crap bills.
December 28th, 2009 at 9:55 am
Gramm, Leach, and Bliley are Republicans.
The synopsis of party split on the vote (from Wikipedia):
The House passed its version of the Financial Services Act of 1999 on July 1st by a bipartisan vote of 343-86 (|Republicans 205–16; Democrats 138–69; Independent/Socialist 0–1),[3] [4] [5] two months after the Senate had already passed its version of the bill on May 6th by a much-narrower 54–44 vote along basically-partisan lines (53 Republicans and one Democrat in favor; 44 Democrats opposed).
_________
While the (D) party has nothing to be proud of, the blame for the repeal of Glass-Steagall isn’t shared equally between the parties.
December 28th, 2009 at 9:57 am
Nice catch Barry.
December 28th, 2009 at 9:57 am
Gramm, Leach, and Bliley are Republicans.
The synopsis of party split on the vote (from Wikipedia):
The House passed its version of the Financial Services Act of 1999 on July 1st by a bipartisan vote of 343-86 (|Republicans 205–16; Democrats 138–69; Independent/(redacted) 0–1), two months after the Senate had already passed its version of the bill on May 6th by a much-narrower 54–44 vote along basically-partisan lines (53 Republicans and one Democrat in favor; 44 Democrats opposed).
_________
While the (D) party has nothing to be proud of, the blame for the repeal of Glass-Steagall isn’t shared equally between the parties.
December 28th, 2009 at 9:59 am
Very frustrating to read things like that, the Glass-Steagall issue…(very frustrating indeed after reading your book and seeing what these lunatics in DC did to the economy) Who needs to invest in the stock market anyways? I’d be better off cashing in and bankrolling some hot up-n-coming Poker Star who dropped out of the MIT math dept.
December 28th, 2009 at 10:14 am
The quote by Phil the shrill that it allowed them to be more competitive is such a misrepresentation of the facts it belies logic. They have no interest in increasing competition. By definition increased competition would reduce profits not increase them for the banksters. More lies.. all to rationalize the bogus decisions and to protect ‘legacies’ of deception.
December 28th, 2009 at 10:16 am
well, if it happens, i will say we are on the road to recovery because finally one item of insanity will be stopped
December 28th, 2009 at 10:18 am
even though smaller in numbers, the “bring back glass steagall” forces are starting to get their act together.
is there a problem or was there a problem with 60+ successful years?
did you ever hear a “stuck pig?” goldman sachs would scream the most. the largest abuser of the public and “miscreants” is a kind description.
starting with paul volcker and john reed (ex citibank ceo) are among a growing movement to bring glass steagall back..
anybody who thinks easy money was the main culprit to the problem is misguided. 20x or 30x leverage against non existent assets did the trick. well, with the new proposed prison facilities in illinois, there’s lots of room.
December 28th, 2009 at 10:32 am
Bankers don’t have the best record when it comes to Glass-Steagall. On May 20, 1933, the New Jersey Bankers’ Association sent President Roosevelt a resolution that, if adopted, Glass-Steagall’s deposit insurance provisions (FDIC) would ruin American banking. Their resolution read:
“Disastrous state experiences have shown that guarantee proposals are unsound in principle and should not be undertaken by the Federal government or any other agency.”
This put them in accord with the Pennsylvania Bankers’ Association, which had passed a similar resolution.
At the same time, the Merchant’s Association of New York attacked the FDIC proposal on the grounds that:
“the inevitable consequences of establishing a deposit-guarantee fund are a relaxation of vigilance as to who enters the banking business and a relaxation of caution on the part of some who are already in it.”
**The bankers were wrong then, and they’re wrong now.
Source–New York Times, “Bankers Oppose Deposit Insurance,” May 21, 1933
December 28th, 2009 at 10:39 am
As a single issue to try to provide legs to, reinstating Glass-Steagall holds promise; its repeal was bipartisan enough to avoid a partisan blame game, and it is specific enough to keep people organized and focused. If the term could get spoken often enough on the money-porn channels, then at might just work its way into the campaign lexicon. You gotta start somewhere, else Mr Blankfein will keep smirking…
December 28th, 2009 at 10:44 am
Barry, you posted a neat interactive graphic some months back showing the change in global banking rankings over the last decade. I can’t find it now but it showed how US and Japanese banks have gotten bumped by Chinese banks with only a couple of US banks in the top 10, Goldman being one.
We know you support the continued existence of the Fed to protect the US because there is a kind of global central bank “arms race,” but how about TBTF institutions? Where do we go from here as China comes online and a a few hundred million people put savings in these giant quasi-state run entities? Would NOT socializing/monetizing US bank losses put the US at a “competitive” (and I use that term very loosely) disadvantage vis a vis China?
Can anybody recommend any good reading to help folks understand the Chinese financial system? The only thing I know is their currency is pegged to the dollar and they are holding a few hundred billion in US debt. But how about regulation, interaction with their central bank, leverage limits, etc.? What’s their exposure to toxic assets?
If you re-impose Glass Steagall type requirements on US banks, should the Fed be restructured to have more (smaller) banks represented in committee leadership?
December 28th, 2009 at 11:10 am
Talk about TALKING YOUR BOOK — this lawyer has no idea WTF he is saying, other than reinstating Glass Steagall will hurt his business.
I had the same reaction to that quote, but a word more colorful than “tool” leaped to mind.
December 28th, 2009 at 12:35 pm
The sudden, bi-partisan push to restore Glass-Steagall could be seen an act of war only if it is flanked with legislative action effectively returning power to “coin money” to Congress. In so doing a bankruptcy reorganization of the Federal Reserve System also will become necessary, putting aside trillions in illegitimate financial claims whose making whole is quite impossible given the collapsed state of our nation’s physical economy particularly in the areas of energy production, food production, basic materials, education and health care delivery systems. Outside this effort, restoration of Glass-Steagall is of little promise in and of itself because, in fact, the horses already have left the barn. The same goes for other regulatory reform efforts. All are for naught absent bankruptcy reorganization and return of power to coin money to the Congress (via a Hamiltonian national bank).
December 28th, 2009 at 12:36 pm
All this talk about re-instating GLass-Steagall is just re-election blather.
Oh sure, they’ll pass The Universal All-Time All-Star Patriot Little Guy Financial Protection Act. (Did I forget any key code words?)
But it will have holes you can drive a truck through and prohibit nothing important to the big boys.
December 28th, 2009 at 1:47 pm
Transor Z, the graphic you look for:
http://www.ritholtz.com/blog/2009/03/financial-institutions-market-cap-1999-2009/
http://www.ritholtz.com/blog/2009/06/top-1000-world-banks-for-2009-by-tier-1-capital/
This site has 3 pages of banks rankings:
http://www.gfmag.com/tools/best-banks.html
December 28th, 2009 at 2:10 pm
Thanks, LLouis! The market cap graphic (first link you provided) was what I was thinking of.
As far as Tier 1 capital ratings go, probably an awful lot of BS is being baked into that now:
http://www.eief.it/files/2009/11/huizinga_laeven_accounting_nov_9.pdf
Regular readers of TBP probably don’t need to read past the introductory paragraph of this paper out of CEPR:
At times of financial crisis when asset markets become distressed, large differences between book and market values of bank assets may arise, especially when assets are carried at values based on historical cost. Such differences give rise to incentives for banks to use accounting discretion to preserve the book value of the bank, for example, by using advantageous valuation techniques and making favorable assessments of asset impairment. As a consequence, discretion in accounting rules causes banks to understate underlying balance sheet stresses and to overstate regulatory capital.
December 28th, 2009 at 10:20 pm
From the same Bloomberg piece:
“A lot of this is about trying to find somebody to blame,” said Gramm, now a vice chairman of investment banking at UBS Securities LLC.”
No further comment required really.
December 29th, 2009 at 11:54 am
aaaand CNBC just followed suit with “War on Wallstreet?” on the screen for an entire segment. Don’t know what they said as I had the sound off.