We Have Learned NOTHING

Well, as we so easily forget history in this country, we are now likely doomed to repeat it. Lehman Brothers is bankrupt, and by this time Wednesday, AIG probably will be as well. And how did this whole subprime mess come to be in the first place?

BEGIN RANT

You can really point to one main issue: how freaking STUPID our government is.

OK, OK, I know I need to back that up. So here goes. In October 29, 1929 the market crashed, a date that is widely accepted as the beginning of the Great Depression. In 1933, largely in response to Black Tuesday and the subsequent banking collapse of 1933, Congress pass the Glass-Steagall Act of 1933 which established the Federal Deposit Insurance Corporation (FDIC) and enacted certain reforms.

You can read up on it here: http://en.wikipedia.org/wiki/Glass-Steagall_Act

In particular, it introduced the separation of bank types according to their business (commercial and investment banking), primarily to curb speculation. Gosh, is this starting to sound familiar to anyone?

Now, from Wikipedia:

On November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One of the effects of the repeal was to allow commercial and investment banks to consolidate.

The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.

Wow. I mean, WOW. And Congress can't even feign ignorance of history, as they did a study in 1987 about the pros and cons of a repeal. Quoting Wikipedia again:

The argument for preserving Glass-Steagall (as written in 1987):

1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

Let's run down the list here, in terms of recent market action.

1. Well, Citigroup, Countrywide, Wamu, Lehman, AIG, etc, etc, are all great examples here
2. Uh, yep. See #1.
3. Really? Enormous losses? Crazy. How about Bear Stearns, Fannie Mae, and Freddie Mac for examples of recent bailouts.
4. WTF? The "crash of real estate investment trusts"!!! OMG. Now we've even got real estate in the mix.

Oh, I love it. From 2000 on megabanks, run by allegedly "Really Smart Guys", had their common sense completely dominated by their greed. I especially love the part about "managers thus may not be conditioned to operate prudently in more speculative securities businesses." Well, I'd say that one line just about sums it up, don't you think?

Which brings me back to how freaking stupid our Government is. They knew ALL of this, and yet they passed the repeal of Glass-Steagall ANYWAY.

If we really want some "Change We Can Believe In", we need to vote out every last stupid Congressman (or Congresswoman) or Senator who voted for this repeal (if they're still in office, of course).

In case you're wondering, here are the members of Congress who need the boot:

http://clerk.house.gov/evs/1999/roll570.xml

And here are the Senators:

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm...

Find your District and State. If those idiots are still in Office, I politely, but firmly, suggest you contact them and let them know how disappointed you are in their lapse of judgment in 1999. And that furthermore, they will not have your support in 2008, in light of recent events.

Oh, and don't forget to tell them how STUPID they are.

END RANT