David Stockman, the former Congressman and Reagan’s Office of Management and Budget director, wrote in his blog on Feb. 12 under the title: “Shoot Bank Of America Now—The Case For Super Glass-Steagall Is Overwhelming.” He targets Bank of America, which was exposed Thursday in the Wall Street Journal for yet more criminal activity, this time involving tax evasion by moving U.S.-based funds covered by the Federal Deposit Insurance Corp. (FDIC) to London for certain stock operations which are illegal in the United States.
But his attack is on the system as a whole. He writes:
“The mainstream narrative about ‘recovery’ from the financial crisis is a giant con job. And nowhere does the mendacity run deeper than in the ‘banks are fixed’ meme—an insidious cover story that has been concocted by the crony capitalist cabals that thrive at the intersection of Wall Street and Washington…. This latest abuse by BAC’s London operation is, in fact, just the tip of the iceberg—the symptom of an unreformed banking regime that is rotten to the core and that remains a clear and present danger to financial stability and true economic recovery.”
He says the entire banking system requires a
“sweeping new regime based on a super-Glass-Steagall operational and regulatory framework. Moreover, this new deal must start with the recognition that the banking sector is vastly bloated, inefficient, and destructive, owing to the erroneous predicate that ever more debt is the lynch-pin [sic!] of capitalist growth and prosperity. Indeed, the only reason that—six years after what is claimed to have been a near Armageddon event—we are still plagued with TBTF [and] the regulatory monstrosity known as Dodd-Frank.”
On Glass-Steagall he writes:
“Self-evidently, the scheming to abuse and arbitrage the deposit insurance safety net chronicled above would not have happened had Glass-Steagall never been repealed in the first place. Indeed, the great financial statesman, Sen. Carter Glass, had been totally opposed to deposit insurance owing to the inherent moral hazard and potential for abuse. He had therefore reluctantly embraced it in the 1933 act that bears his name only on the condition that investment banking and deposit banking be explicitly and forever kept separate…. So forget Dodd-Frank; it is a crony capitalist regulatory puzzle palace that will not do one bit of good and is actually providing the anesthesia that keeps Washington sleepwalking—until the next crisis.
“The real super-Glass-Steagall reform that is needed is to restrict FDIC coverage to ‘narrow’ deposit banking. This means that any bank wishing to offer FDIC insured accounts would be strictly prohibited from engaging in trading, underwriting or agenting any business in securities, derivatives, commodities and whole loans that it had not originated.”
Stockman also suggests capping all banks to 1% of GDP, or about $200 billion.
He concludes:
“Obviously, our corrupt crony capitalist system of governance will never permit this to happen. So we will have endless WSJ exposés like today’s story. And we will also have even greater financial crises than September 2008. That much is already baked into the cake.”
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