The passage of the 1933 Glass-Steagall Act separated commercial banking from investment banking, and for 75 years there were no enormous financial meltdowns in the United States originating from the banking sector of the economy. In 1999, the Gramm-Leach-Bliley Act repealed the main provisions of Glass-Steagall and, in the view of critics of the repeal, the countdown to financial meltdown began, culminating in the Great Recession which began in 2008. The meltdown, like the Great Depression which gave birth to Glass-Steagall, had worldwide repercussions, but in the aftermath there have been only watered down reforms of the banking industry in the US such as the Dodd-Frank Act, and no high level banking executives have gone to jail, been taken to court, or even been indicted. It’s only a matter of time therefore before a similar financial crisis strikes the US, particularly since the new presidential administration is talking about dismantling Dodd-Frank.
Crowd gathering on Wall Street after the stock market crash on October 25, 1929.
Like other European nations, Iceland was swallowed up in the 2008 financial crisis. Like the United States, it had its own unruly banking sector contributing to the crisis – casino banks, in the sense that they used the money from depositors in their commercial operations to gamble on dubious investments, always passing along losses to customers while reaping the profits mostly for themselves. As in casinos, the house rarely loses, and in the case of casino banks when it appears they might lose the government will be there to bail them out. That’s the deal banks have come to count on, particularly if they are “too big to fail.” Unlike other European nations and definitely unlike the United States, Iceland allowed its casino banks to fail and then vigorously investigated and prosecuted the casino bankers responsible. In Iceland, 26 top bankers have gone to jail since 2008, and moreover their economy has rebounded robustly. In the US, 0 top bankers are wearing orange jumpsuits as a consequence of causing the 2008 financial meltdown, and the economy has limped slowly toward recovery ever since.
It’s interesting to note that the 2016 Republican Party platform included a plank about reinstating Glass-Steagall. Wall Streeters were alarmed at first, but then everyone realized it was merely politics as usual and that the incoming Republican administration and Congress had no intention of taking the idea seriously. They have been proven correct. Democrats make rumbling noises occasionally about reinstating Glass-Steagall, but even if they had the will, they don’t have the votes. It’s all just politics at this point, since Wall Street money has long since turned heads in both major parties.
“Let them eat cake!”
There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat. Republicans are a bit stupider, more rigid, more doctrinaire in their laissez-faire capitalism than the Democrats, who are cuter, prettier, a bit more corrupt – until recently … and more willing than the Republicans to make small adjustments when the poor, the black, the anti-imperialists get out of hand. But, essentially, there is no difference between the two parties.
― Gore Vidal, from his 1975 essay “The State of the Union”.
Social reforms wrought from identity politics are all to the good, but as always in our culture the primary fixation should be on the money. Martin Luther King, Jr., understood this when he traveled to Memphis, Tennessee, in 1968 to speak to striking African-American sanitation workers. Without work and the personal dignity that comes from a living wage, people cannot begin to address their social situation and have the energy to improve their lot within society as a whole. For the poor and the middle class it all starts with money, and for the rich it ends there as well. The oligarchic elite take advantage of social issues like gay marriage to divide and distract the majority while they continue to concentrate wealth and power in their own hands. There are two financial reforms which would go a long way toward stemming the rising power of the corporate oligarchy and restoring power to the majority of Americans: reinstatement of Glass-Steagall or something very much like it, and the legislative or constitutional rescission of the Supreme Court’s Citizens United decision of 2010.