By Pam Martens and Russ Martens: January 4, 2018
On Monday, 37-year old Arthur Gregg (A.G.) Sulzberger took the helm as the new Publisher of the New York Times, succeeding his father, Arthur Ochs Sulzberger Jr., whose tenure in the post lasted for the past quarter of a century.
A.G. has previously held positions at the Times as metro reporter, national correspondent, associate editor for strategy and deputy publisher. He marked the occasion of becoming the fifth generation of his family to assume the mantle of Publisher by invoking his great-great grandfather, Adolph Ochs, who promised readers he would “give the news impartially, without fear or favor, regardless of party, sect, or interests involved.” A.G. then added his own 900-word promise for “independent, courageous, trustworthy journalism” on his watch.
In one particularly poignant passage from the missive, A.G. writes:
“The Times will hold itself to the highest standards of independence, rigor and fairness — because we believe trust is the most precious asset we have. The Times will do all of this without fear or favor — because we believe truth should be pursued wherever it leads.”
Wall Street On Parade has a unique basis on which to test the sincerity of A.G.’s promise for “truth.” For the past five years Wall Street On Parade has requested that management at the New York Times correct the extraordinary, non-factual reporting it has published on the relationship that the repeal of the Glass-Steagall Act had on the epic Wall Street collapse of 2008, which resulted in the most devastating economic crisis since the Great Depression.
The New York Times has good reason to be defensive about the Glass-Steagall Act repeal in 1999. It was one of the major cheerleaders for the repeal.
The 1933 Glass-Steagall Act was passed by Congress at the height of the Wall Street collapse that began with the 1929 stock market crash, the insolvency and closure of thousands of banks, followed by the Great Depression. The legislation tackled two equally critical tasks. It created Federally-insured deposits at commercial banks to restore the public’s confidence in the U.S. banking system and it barred commercial banks that were holding those insured deposits from being part of a Wall Street investment bank or securities underwriting operation because of the potential for high risk speculative trading and losses to render the taxpayer-supported bank insolvent.
The Glass-Steagall legislation protected the U.S. banking system for 66 years until its repeal under the Bill Clinton administration in 1999 at the behest of Wall Street and its legions of lobbyists. It took only nine years after its repeal for the U.S. financial system to crash, requiring the largest public bailout in U.S. history.
In 1988 a Times editorial read: “Few economic historians now find the logic behind Glass-Steagall persuasive.” Another in 1990 ridiculed the idea that “banks and stocks were a dangerous mixture,” writing that separating commercial banking from Wall Street trading firms “makes little sense now.”
On April 8, 1998, the editorial board of the New York Times became an outright cheerleader for a bank merger that would end up devastating Wall Street. The editorial was so pro-Wall Street and anti-public interest that it could have come straight from the desk of Sandy Weill, the man who wanted to merge his brokerage firm, Smith Barney, his investment bank, Salomon Brothers, and his insurance company, Travelers Group, with the large insured commercial bank, Citicorp, owner of Citibank. (The behemoth bank became known as Citigroup as a result of the merger and was the single largest recipient of the taxpayer bailout during the 2007-2010 financial crisis.)
The New York Times editorial was absolutely gleeful in its push for demolishing the walls between taxpayer insured deposits and Wall Street casinos. The Times wrote:
“Congress dithers, so John Reed of Citicorp and Sanford Weill of Travelers Group grandly propose to modernize financial markets on their own. They have announced a $70 billion merger — the biggest in history — that would create the largest financial services company in the world, worth more than $140 billion… In one stroke, Mr. Reed and Mr. Weill will have temporarily demolished the increasingly unnecessary walls built during the Depression to separate commercial banks from investment banks and insurance companies.”
Just one decade after that editorial ran and nine years after Congress repealed Glass-Steagall, Wall Street collapsed, leaving the U.S. in an economic crisis that continues to this day in terms of unprecedented wealth inequality and subpar economic growth. (The Editor of Wall Street On Parade, Pam Martens, testified before the Federal Reserve on June 26, 1998, warning that a financial crisis would result from the Glass-Steagall repeal. See the video of that testimony here.)
After the Times cheerleading helped to usher in the financial crisis, its management had the temerity to allow its business reporter, Andrew Ross Sorkin, to write an extraordinary, error-filled revisionist history about the financial collapse. We critiqued that piece as follows in an article jointly published at AlterNet and Wall Street On Parade:
“On May 21, 2012, the Times published a piece by Sorkin, titled: ‘Reinstating an Old Rule Is Not a Cure for Crisis.’ The premise was that the Glass-Steagall Act would not have prevented the financial collapse, the very claptrap coming out of the mouths of Wall Street lobbyists into the attentive ears of the Senate Banking Committee. The article put forth the following ‘facts.’
‘Let’s look at the facts of the financial crisis in the context of Glass-Steagall.
‘The first domino to nearly topple over in the financial crisis was Bear Stearns, an investment bank that had nothing to do with commercial banking. Glass-Steagall would have been irrelevant. Then came Lehman Brothers; it too was an investment bank with no commercial banking business and therefore wouldn’t have been covered by Glass-Steagall either. After them, Merrill Lynch was next — and yep, it too was an investment bank that had nothing to do with Glass-Steagall.
‘Next in line was the American International Group, an insurance company that was also unrelated to Glass-Steagall.’
“There are four companies mentioned in those five sentences and in every case, the information is spectacularly false. 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, 75 days before Lehman went belly up. Lehman Brothers Banks 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.’
“Merrill Lynch also owned three FDIC insured banks. At an FDIC symposium held at the National Press Club in 2003, Merrill Senior VP, John Qua, explained the banking side of Merrill as follows:
‘Merrill Lynch conducts banking in the United States through two depository institutions – Merrill Lynch Bank USA, a Utah industrial loan corporation; and Merrill Lynch Bank and Trust, a New Jersey state non-member bank. We also own a federal savings bank that offers personal trust services to our clients. And we conduct significant banking activities outside the United States through banks in London, Dublin, Switzerland, and elsewhere. The combined balance sheet of our global banks is approximately $100 billion.’
“Bear Stearns owned Bear Stearns Bank Ireland, which is now part of JPMorgan and called JPMorgan Bank (Dublin) PLC. According to JPMorgan, ‘It is the only EU passported bank in the non-bank chain of JPMorgan and provides the firm with direct access to the European Central Bank repo window. It has also been added to the JPMorgan Jumbo issuance programs to issue structured securities for distribution outside the United States.’
“As for the statement that AIG was ‘an insurance company that was also unrelated to Glass-Steagall,’ one has the initial reaction to cancel one’s subscription to the New York Times. AIG owned, in 2008 at the time of the crisis, the FDIC insured AIG Federal Savings Bank. On June 30, 2008, it held $1 billion in assets. 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 whole company selling credit default derivatives. What this has to do with Glass-Steagall is that the same deregulation legislation, the Gramm-Leach-Bliley Act that gutted Glass-Steagall in 1999, also gutted the 1956 Bank Holding Company Act and allowed insurance companies and securities firms to be housed under the same umbrella in financial holding companies.”
We appealed to the Public Editor, the Managing Editor, and the Publisher of the New York Times to correct Sorkin’s grossly erroneous report on multiple occasions. Nothing has been corrected to this day. What followed instead were subsequent writers pushing this false narrative in the pages of the New York Times. (See our Related Articles below.)
The situation today is that the serially charged JPMorgan Chase and Citigroup, Weill’s Frankenbank, continue to own two of the largest insured commercial banks in the U.S. – Chase and Citibank. They are also two of the largest derivative dealers, housing trillions of dollars in high risk derivatives, the instruments which played a major role in blowing up Wall Street in 2008.
According to a 2015 report from the U.S. Treasury’s Office of Financial Research, those two banking institutions now pose the greatest interconnected risk to the U.S. financial system, which reaffirms the need for the restoration of the Glass-Steagall Act. In May of 2015, after an endless stream of dangerous trading scandals at both firms, the two banks admitted to criminal felony charges involving the rigging of foreign currency trading.
If A.G. Sulzberger is sincere in his promise to publish the truth and the facts, he will immediately correct and acknowledge the gross errors in Andrew Ross Sorkin’s piece and issue an apology for making the American people wait this long. We will be writing to him today and asking him to do just that.