Several months ago I read in the newspaper that Coors Beer was having trouble getting aluminum for its beer cans. I checked on the Internet and discovered that bank holding companies are jeopardizing the American economy.
I found out the following, taken from the opening statement by Senator Sherrod Brown (D-Ohio) at a hearing before a subcommittee of the Committee on Banking, Housing, and Urban Affairs, on July 23, 2013: “Goldman Sachs Bank, in its own words, now engages in the production, storage, transportation, marketing and trading of numerous commodities, including crude oil products, natural gas, electric power, agricultural products, metals, minerals, including uranium, emission credits, coal, freight, liquefied natural gas and related products. This expansion of our financial system into traditional areas of commerce has been accompanied by a host of anti-competitive activities, speculation in oil and gas markets, inflated prices for aluminum and, we learned, potentially copper and other metals, and energy manipulation.”
Goldman Sachs is using depositors’ money to fund these ventures and the depositors’ money is guaranteed by the Federal Deposit Insurance Corporation. If Goldman Sachs makes a serious error in these investments, the government may have to bail out the banks to safeguard depositors’ money, like it did in 2008, when the banks made bad loans and speculative investments. The recession of 2008 cost the U. S. economy an estimated $12.2 trillion dollars.
Other large banks also are involved in these types of holding companies. Their involvement in these enterprises is so great that if one of these companies would have a catastrophe like BP’s oil spill in the Gulf of Mexico, it could bring down the economy of the United States.
In 1933, Congress passed the Glass Steagall Act to prevent speculative investments by banks. Over the years this legislation was weakened by congressional amendments passed through the efforts of the banks’ lobbyists. In 1999, during the Clinton administration, due to pressure from Citicorp and Travelers Insurance Company that had merged through a loophole in the legislation, and pressure from other banks, Democrat and Republican Congressmen revoked the Glass Steagall Act and replaced it with a weak Gramm Leach Bliley Act, passing the Senate 90-8.
Senator Byron Dorgan (D-N.D.) stated in 1999, “I think we will look back in 10 years and say we should not have done this, but we did because we forgot the lessons of the past.” In 2008, his words came true. The financial crisis is frequently called the worst since the Great Depression. And the Gramm Leach Bliley Act is often cited as a cause, even by some its one-time supporters.
Former Senator Phil Gramm (R-Texas), a large supporter of the repeal of Glass Steagall, stated that the biggest problem facing the American economy was excessive regulation. We still hear this today by our Congressmen. Some people never learn!
For more information, Google “Examining financial holding companies: should banks… Senate Hearing 113-67.” Scroll down to Senator Sherrod Brown’s opening statement.
The large banks have been gambling with the collapse of our economy for more than 14 years, and there is no legislation to prevent another recession. We should ask our Congressmen to enact a law similar to the Glass Steagall Act to regulate banks.