By Pam Martens and Russ Martens: November 10, 2017
If you feel lost in the cacophony of contrasting claims that Wall Street was adequately reformed under the Dodd-Frank legislation of 2010 or that it remains an insidious wealth transfer system for the 1 percent, then you need to invest one-hour of your time to listen carefully to some of the smartest experts in America address the topic.
A free one-hour video is now available (see below) which should settle the debate once and for all that the Dodd-Frank legislation of 2010 has failed to deliver the needed reforms to Wall Street’s corrupt culture and fraudulent business models and that nothing short of restoring the Glass-Steagall Act is going to make the U.S. financial system safe again.
Don’t let the grainy quality of the video turn you off (it was made from a live webinar): the integrity of the voices will quickly reassure you that you are watching something powerful and critical to the future of the U.S.
The background of the participants is as follows:
Dr. Marcus Stanley is the Policy Director of Americans for Financial Reform, a coalition of more than 250 national, state, and local groups who have come together to advocate for reform of the financial sector. Stanley has a Ph.D. in public policy from Harvard University and previously worked as a Senior Economist at the U.S. Joint Economic Committee.
Nomi Prins is a renowned author whose last book, All the Presidents’ Bankers, is a seminal work on the problematic relationships of Wall Street bankers and U.S. presidents over the past century. Prins is also a respected former veteran of Wall Street investment banks where she reached a top rung as Managing Director of Goldman Sachs.
Bartlett (Bart) Naylor is the Financial Policy Advocate for the nonprofit, Public Citizen, which since its founding in 1971 has served as the voice of the American people in Washington D.C. Naylor is an expert on corporate governance, financial markets and shareholder rights and previously served as Chief of Investigations for the U.S Senate Banking Committee.
Heather Slavkin Corzo is the director of the AFL-CIO Office of Investment and served as the chair of the Americans for Financial Reform task force on derivatives regulation from 2010 through 2013. Corzo holds a law degree from Boston University School of Law.
Also appearing in the video is Mayo Makinde, representing Our Revolution in NW Ohio. The grassroots organization, an outgrowth of Senator Bernie Sanders campaign for President in 2016, has been an active supporter of the restoration of the Glass-Steagall Act.
In the video presentation, Prins addresses the new market bubbles that are occurring today and which pose a serious risk to U.S. financial stability. One dangerous area says Prins is that the Collateralized Debt Obligations (CDOs) that played a major role in blowing up Wall Street in 2007-2008 are still being created but are now called BTOs (Bespoke Tranche Opportunity.)
On August 23 of this year, the Financial Times wrote about the BTOs, noting the following:
“Bespoke tranches are created by allowing investors to pick a bundle of about 100 different ‘single-name’ credit defaults swaps — derivatives that reflect market perceptions of the named company’s creditworthiness. The bundle is then sliced into ‘tranches,’ offering different levels of risk and return…Citigroup is the largest bank counterparty for such trades, according to investors and traders, with JPMorgan Chase and BNP Paribas also active. The resurgence of interest has pushed other banks, such as Goldman Sachs, to begin looking at expanding trading in the product as well.”
Wall Street On Parade has previously highlighted how Citigroup, the bank at the center of the crisis in 2007 and 2008 and the recipient of the largest taxpayer bailout of a bank in U.S. history, has continued to pile into some of the riskiest areas of the market. (See Bailed Out Citigroup Is Going Full Throttle into Derivatives That Blew Up AIG.)
Stanley explains how the repeal of the Glass-Steagall Act led directly to the financial crisis on Wall Street and the greatest economic collapse since the Great Depression. Stanley says that when “you repealed Glass-Steagall you took down those firewalls between the different parts of the financial system and you allowed these mega banks to grow; that combined the support for the commercial bank (the government-guarantee to your insured deposits) and the capital markets activity of the big investment banks. And all of those giant mega banks were simultaneously involved in the same fraudulent business models.”
One fraudulent business model cited by Stanley was the CDO market – a $640 billion market which Stanley says lost 65 percent of its value after being sold as AAA-rated securities, “the Gold Standard,” says Stanley. He compares this to going to a grocery store you trust and bringing home your food to find out that two-thirds of it is toxic.
The speakers urge American citizens to become engaged in the battle to restore the Glass-Steagall Act by calling their members of Congress and demanding that they add their sponsorship to the bills that have been introduced in both the House and Senate to bring back the complete separation of insured depository banks from their high-risk casino cousins, the investment banks of Wall Street. The phone number to reach either your Senator or Congress Member is 202 224 3121.