Sunday, September 21, 2008

Great Alexander Cockburn article on the economy

From Counterpunch.org:

"In 1999 John McCain’s friend and now his closest economic counselor, then a senator from Texas, was the prime Republican force pushing through the Gramm-Leach-Bliley Act. It repealed the old Glass-Steagall Act, passed in the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Bill Clinton cheerfully signed it into law.

A year later Gramm, chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill, voted on by Congress right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernization Act which okayed deregulation of investment banks, exempting most over the counter derivatives, credit derivatives, credit defaults, and swaps from regulatory scrutiny. Thus were born the scams that produced the debacle of Enron, a company on whose board sat Gramm’s wife Wendy. She had served on the Commodity Futures Trading Commission from 1983 to 1993 and devised many of the rules coded into law by her husband in 2000."

....

But is he Exhibit A? No. That honor should surely go to Robert Rubin and to the economic course he set for his boss, the eagerly complicit Bill Clinton. Gramm has been the hireling of the banking industry. Rubin is at the beating heart of Wall Street finance, and he and Lawrence Summers at Clinton’s Treasury, were the guiding forces for financial deregulation.

Obviously the Republicans hoped that the roof wouldn’t fall in on their watch, and the crisis could be deferred to 2008 and then blamed on the Democrats. But their insurance policy was that if the roof did cave, as it has now, the rescue policy would be identical in both cases. That’s why Obama has collected more money than McCain from the big Wall Street houses.

The gang that successfully got out of Dodge in time was the Clinton-Rubin-Summers gang, just before the last bubble -–the stock market bubble -- burst in March of 2001. They knew what was coming."

I remember when the repeal of the Glass-Steagall Act happened. The big reason for it happening was the desire of Citicorp, formerly CitiBank, to aquire an insurance firm. A quick search yields that it was Travelers Group. Let's let Rubin's Wiki page tell us what happened then:

"In 1999, affirming his career-long interest in markets, Mr. Rubin joined Citigroup. Of note, the supermerger between Travelers Group and Citicorp was facilitated by the repeal of the Glass Steagall Act (Gramm-Leach-Bliley Act). This legislation was passed under the Clinton administration, days before Rubin's resignation. "

Of course, there was no corruption involved there. Rubin was one of the people, along with Lawrence Summers and Allen Greenspan (as Cockburn notes), who oversaw the financial rape of Russia through privatization as well as who helped the IMF implement its "shock therapy" prgorams of complete deregulation in exchange for essential money to keep governments from completely collapsing. Rubin was one of the reasons that the WTO was protested.

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