By Pam Martens and Russ Martens: September 14, 2017
Yesterday, one of our readers sent us a link to an article at Real Clear Politics by Allan Golombek which makes the same error-filled assertions as those of Andrew Ross Sorkin at the New York Times: that the repeal of the Glass-Steagall Act did not lead to the U.S. financial crisis of 2007-2010.
Golombek’s bio at the end of the article says only that he is “a Senior Director at the White House Writers Group.” A check at the firm’s website shows it to be an organization that freely admits to being paid by corporations and other special interests to advance their position in the media. The firm states: “Whether in a campaign or a crisis, we help our clients determine how best to define their messages for media acceptance and then disseminate those messages for maximum exposure and impact.”
There are two key problems here. Not every reader will take the time to ferret out what the White House Writers Group is all about and, more importantly, neither Golombek nor Real Clear Politics discloses who the ultimate client is behind Golombek’s message. If Golombek had disclosed in his bio that his firm was being paid by a major Wall Street bank or trade association to push this position on Glass-Steagall, would Real Clear Politics have run the article? By withholding this information, isn’t the reader left badly misinformed as to motive.
There is also the question as to exactly where the premise of this article originated. According to his LinkedIn bio, Golombek has never worked a day on Wall Street. In fact, he doesn’t even reside in the U.S. His bio says he “resides in his hometown of Toronto.”
His position sounds uncannily like that of Andrew Ross Sorkin at the New York Times and that of the JPMorgan Chase CEO, Jamie Dimon, who also has a curious camaraderie with Andrew Ross Sorkin. Dimon appeared at the 2009 book party for Sorkin’s book, Too Big to Fail, and Dimon headlined the first New York Times DealBook Conference in 2012 where he was interviewed on stage by Sorkin, who serves as the official host of the annual, money-making conference. This year’s upcoming conference on November 9 promises that corporations can “Align your brand with influential consumers, business leaders, entrepreneurs and visionaries through high-impact integrations. Host delegates at private cocktail or dinner receptions, conduct on-site polling, develop custom content, display product and amplify your sponsorship through on-site branding and extensive print, digital and social media promotion.”
The 2012 inaugural DealBook conference raised so many ethical concerns that the Times’ own Public Editor at the time, Margaret Sullivan, questioned it. Sullivan wrote:
“…with the pricey tickets and the all-platforms-blazing corporate sponsorships, the event brought in plenty of much-needed revenue for The Times.
“Here is what the conference did not have going for it: A great deal of distance between sources and those who cover them – something traditionally thought to be a bedrock journalistic idea.”
The Times has removed the ability to be so harshly critiqued in this manner by its own Public Editor. This spring, it eliminated the longstanding position entirely.
Restoring the Glass-Steagall Act is no minor issue. The public deserves the right to know who is lurking in the shadows behind these articles. Restoring the legislation was included in both the Republican and Democratic platforms last year. The debate’s outcome will determine whether the U.S. financial system and the U.S. economy will survive the next major debacle on Wall Street. The public was kept in the dark until 2011 that the financial system and U.S. economy only survived the 2008 crash because the Federal Reserve was secretly pumping $16 trillion in almost zero interest loans to Wall Street and its foreign brethren from 2007 through at least the middle of 2010. The Troubled Asset Relief Program (TARP), whose details were publicly disclosed, represented a tiny portion of the actual, massive bailout.
Glass-Steagall legislation was enacted in 1933 and kept the U.S. financial system safe for 66 years until its repeal in 1999. It was put in place in 1933 as the stock market was on its way to losing 90 percent of its value following the 1929 crash and after the U.S. Senate had spent three years intensely investigating the Wall Street corruption that had caused the crash. It was wisely decided by Congress and President Franklin Delano Roosevelt that the new legislation would ban banks holding insured deposits backstopped by the taxpayer from being housed under the same roof with Wall Street’s casino-like investment banks and brokerage firms, which had a jaded history of blowing themselves up. Nine short years after the repeal of Glass-Steagall, century old iconic names on Wall Street lay in ruins and their demise and interconnectedness led to the worst economic crisis in the United States since the Great Depression.
Sorkin’s grossly erroneous position is that none of the Wall Street firms that failed owned insured depository banks so Glass-Steagall was irrelevant to the crash. He has specifically mentioned Lehman Brothers, Merrill Lynch and AIG as having nothing to do with the repeal of Glass-Steagall. But, in fact, they all did own FDIC-insured banks at the time of the crash, holding billions of dollars in insured deposits backstopped by the taxpayer. And Citigroup, parent of the sprawling insured retail bank, Citibank, and its 2,000 investment and insurance-related subsidiaries, was the poster child for the wreckage caused by the repeal of Glass-Steagall. Citigroup became insolvent during the crash and received the largest taxpayer bailout in the history of finance: more than $2.5 trillion in low cost loans, equity infusions and asset guarantees.
In yesterday’s piece by Golombek, he parrots Sorkin with this:
“In fact, knocking down the walls between financial services didn’t help cause the financial meltdown so much as help contain it. None of the institutions that ended up doing the most to prompt the financial meltdown was a financial hybrid.”
Last year, Dimon said on CNBC that the repeal of Glass-Steagall “had nothing to do with the crisis” of 2008.
It’s time to find out exactly whom Golombek speaks for and who is funding his voice.