By Pam Martens and Russ Martens: December 8, 2015
Yesterday, the New York Times gave Presidential candidate Hillary Clinton a free infomercial (a/k/a OpEd) to spin her toothless plan “to rein in Wall Street.” Hillary begins by telling us this:
“Seven years ago, the financial crisis sent our economy into a tailspin. Over five million people lost their homes. Nearly nine million lost their jobs. Nearly $13 trillion in household wealth was wiped out.”
But that’s not what her husband, former President Bill Clinton told us was going to happen when he repealed the 66-year old Glass-Steagall Act on November 12, 1999. Here’s what Bill Clinton promised us from this massive deregulation of Wall Street: (See video of his full remarks below.)
President Bill Clinton:
“You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right…
“It is true that the Glass-Steagall law is no longer appropriate for the economy in which we live…And today what we are doing is modernizing the financial services industry, tearing down these antiquated laws and granting banks significant new authority. This will, first of all, save consumers billions of dollars a year through enhanced competition. It will also protect the rights of consumers. It will guarantee that our financial system will continue to meet the needs of underserved communities…
“This is a very good day for the United States. Again, I thank all of you for making sure that we have done right by the American people and that we have increased the chances of making the next century an American century…the future of our children will be very bright, indeed.”
President Bill Clinton was wrong on every single point and every single promise he made to the American people on November 12, 1999 when he signed the legislation that would once again set up the conditions of the 1929 crash, allowing deposit-taking banks to merge with securities trading firms. And because Hillary Clinton comes from that same Wall Street mindset and echo chamber that repealed the Glass-Steagall Act, she cannot be trusted to repair the epic damage her husband and his Wall Street high roller pals have caused our nation.
Hillary attempts to bolster her detail-lite plan to rein in Wall Street with this assertion in her Times OpEd:
“My plan also goes beyond the biggest banks to include the whole financial sector. Some have urged the return of a Depression-era rule called Glass-Steagall, which separated traditional banking from investment banking. But many of the firms that contributed to the crash in 2008, like A.I.G. and Lehman Brothers, weren’t traditional banks, so Glass-Steagall wouldn’t have limited their reckless behavior.”
First, Glass-Steagall was not a “rule.” It was the most powerful financial legislation ever passed by the U.S. Congress in 1933 and it protected the nation from another 1929 style crash for almost seven decades. Just nine years after its repeal, Wall Street crashed and caused the greatest economic upheaval since the Great Depression.
What Hillary isn’t telling you about AIG, the giant insurance company which blew up in 2008 from selling credit derivatives to Wall Street firms and received a massive taxpayer bailout, is that it was also Bill Clinton’s administration that allowed AIG to become a derivatives powder keg by also passing and signing into law the Commodity Futures Modernization Act in the waning days of his administration. This act removed these dangerous derivatives from regulatory oversight. Additionally, the legislation that Bill Clinton signed into law that repealed the Glass-Steagall Act, the Gramm-Leach-Bliley Act, also repealed the sections of the Bank Holding Company Act of 1956 that had separated commercial banking from insurance.
At the time AIG blew up in 2008, it was a global insurance company peddling billions in insurance annuities to moms and pops around the globe; it owned the FDIC insured AIG Federal Savings Bank. AIG also owned 71 U.S.-based insurance entities and 176 other financial services companies throughout the world, including AIG Financial Products which blew up the company. None of this could have happened without the deregulation that occurred in the Bill Clinton administration.
As for Lehman Brothers, Hillary doesn’t mention that at the time it blew up, Lehman Brothers owned two FDIC insured banks, Lehman Brothers Bank, FSB and Lehman Brothers Commercial Bank. Together, they held $17.2 billion in assets as of June 30, 2008. Lehman Brothers Bank FSB is where Lehman handled its mortgage loan originations. When the FDIC approved the Lehman Brothers Commercial Bank application in 2005, it specifically noted that the FDIC insured bank “anticipates acting as a derivatives intermediary, engaged in matched trading of interest rate products, primarily interest rate swaps, as well as forward purchase agreements and options contracts.” None of this would have been possible without Bill Clinton’s deregulation of Wall Street.
Have Americans who are supporting Hillary’s run given any serious thought to how her administration would function with Bill Clinton, the former deregulator-in-chief of Wall Street, residing in the White House and having her ear on a daily basis.
Massive amounts of Wall Street money bought the repeal of the Glass-Steagall Act and that money is now gushing into Hillary’s campaign to make sure that Glass-Steagall remains gutted. Robert Rubin, Bill Clinton’s Treasury Secretary who pressed for the repeal and then quickly moved to its main beneficiary, Citigroup, to collect over $126 million in compensation over the next decade, while also being on hand to watch the banking behemoth collapse into the arms of the taxpayer from toxic derivative bets, is now a player in Hillary’s bid for the White House.
According to donor records at the Federal Election Commission (FEC), Robert Rubin and 12 of his partners and colleagues at Centerview Partners, have each given the maximum for Hillary’s primary bid, i.e., $2700. Each will again be allowed to contribute another $2700 for her general election bid if she succeeds in the primary. In addition, they can each contribute up to $5,000 a year to a PAC (political action committee) that supports Federal candidates; $10,000 per calendar year to a State or local party committee; $33,400 per calendar year to a national party committee and this limit applies separately to a party’s national committee, House campaign committee and Senate campaign committee.
For example, one of Rubin’s partners at Centerview, Charles (Skip) Paul, contributed $2700 to Hillary for America on April 25, 2015 as well as $32,400 to Grassroots Victory Project 2014 (a project supporting Democrats), and over $30,000 on June 28, 2011 to the Obama Victory Fund according to FEC records. Other Centerview partners have also made donations to Democrat committees in excess of $20,000 in a lump sum.
And Centerview does not even rank among the top financial firms whose employees and/or family members are funding Hillary’s campaign. According to the Center for Responsive Politics, three major Wall Street firms (Bank of America, JPMorgan Chase and Morgan Stanley) rank in Hillary’s top 20 donors. Equally noteworthy, three major Wall Street law firms also rank in the top 20: Sullivan and Cromwell; Akin, Gump; Skadden, Arps.
We’re still in the primary season and Hillary’s campaign committee has raised $76 million from individual contributors with 81 percent of that coming from large donors, according to the Center for Responsive Politics.
When it comes to hollow promises to rein in Wall Street, Americans have had voter’s remorse for far too long. Isn’t it time for a meaningful change?