By Pam Martens and Russ Martens: December 29, 2020 ~
As Senator Bernie Sanders advocates for $2,000 pandemic relief checks for struggling Americans, Larry Summers is challenging the premise of $2,000 checks using ginned-up statistics that were dubiously published by Bloomberg News on Sunday.
Larry Summers stepped into Robert Rubin’s post as Treasury Secretary under President Bill Clinton after Rubin left to make $15 million a year serving on Citigroup’s board. Citigroup was the Frankenbank that both Summers and Rubin made possible by advocating for the repeal of the Glass-Steagall Act. That seminal piece of legislation from 1933 had successfully banned the combination of deposit-taking banks with Wall Street’s casino trading houses for 66 years until these two men and their ilk got Clinton to sign its repeal in 1999.
At the November 12, 1999 signing ceremony for the Gramm-Leach-Bliley Act, the legislation that repealed the Glass-Steagall Act, Summers said this:
“Let me welcome you all here today for the signing of this historic legislation. With this bill, the American financial system takes a major step forward towards the 21st century, one that will benefit American consumers, business, and the national economy for many years to come…I believe we have all found the right framework for America’s future financial system.”
Just nine years later, that framework heralded by Summers brought on the worst financial collapse on Wall Street and in the U.S. economy since the Great Depression. Even the New York Times had to admit that it had been wrong to advocate for the repeal the Glass-Steagall Act. On July 27, 2012 the editorial board of The Times wrote:
“While we are on this subject, add The New York Times editorial page to the list of the converted. We forcefully advocated the repeal of the Glass-Steagall Act. ‘Few economic historians now find the logic behind Glass-Steagall persuasive,’ one editorial said in 1988. Another, in 1990, said that the notion that ‘banks and stocks were a dangerous mixture’ ‘makes little sense now.’
“That year, we also said that the Glass-Steagall Act was one of two laws that ‘stifle commercial banks.’ The other was the McFadden-Douglas Act, which prevented banks from opening branches across the nation.
“Having seen the results of this sweeping deregulation, we now think we were wrong to have supported it.”
Senator Bernie Sanders was serving in the House of Representatives at the time that Glass-Steagall was being pushed for repeal by Summers, Rubin and Wall Street lobbyists. Sanders was one of only 57 members of the House who voted against the Gramm-Leach-Bliley Act that repealed Glass-Steagall.
During the legislative debate, Sanders said the revocation of Glass-Steagall “will lead to fewer banks and financial service providers; increased charges and fees for individual consumers and small businesses; diminished credit for rural America; and taxpayer exposure to potential losses should a financial conglomerate fail. It will lead to more mega-mergers; a small number of corporations dominating the financial service industry; and further concentration of economic power in our country.”
Every prediction that Sanders made has come to fruition while Summers’ promise that the repeal would be “the right framework for America’s future financial system” has turned out to be a twisted, cruel fantasy.
As Sanders correctly foresaw, concentrated economic power as a result of bank mergers has grotesquely distorted banking in the United States. The number of federally insured banks and savings institutions in the U.S. has declined from 9,747 at the end of the second quarter of 2001 to just 5,066 as of June 30 of this year – a stunning decline of 48 percent. Most of this shrinkage has been from mergers.
Concentration of deposits has likewise been dangerously skewed. Just 15 banks today, out of the 5,066 that are federally insured, control 52 percent of all domestic deposits according to data from the Federal Deposit Insurance Corporation (FDIC).
And the crime wave at the largest banks in the U.S. has no precedent in U.S. history. The largest bank in the U.S., JPMorgan Chase, has racked up an unprecedented five felony counts over the past six years while its Board has left the same Chairman and CEO, Jamie Dimon, at the helm of this criminal enterprise which currently holds more than $2 trillion in foreign and domestic deposits.
This is not the first time that Summers has challenged a Sanders’ position in an OpEd. In 2015, Summers challenged Sanders’ views on conflicts at the Federal Reserve, writing as follows in a Washington Post OpEd:
“…it is not my impression that, as a general matter, officials who come from industry have been systematically softer on industry than those who have come from other backgrounds. It is worth pondering that figures much respected for their commitment to aggressive financial regulation like Arthur Levitt came into their positions from full-time roles in industry….”
Invoking the name of Arthur Levitt as an example of “aggressive financial regulation” shows just how factually-challenged Larry Summers really is. Levitt’s tenure as Chair of the Securities and Exchange Commission is covered in the Gary Weiss book, Wall Street versus America. Weiss correctly refers to Levitt as “the terminally shame-deprived Levitt…who can spin the most laughable cop-out into an investor victory….” (For our take on Levitt’s time at the SEC, see An Indulging “Uncle” — Arthur Levitt’s Reign at the SEC.)
Apparently, Summers would have no problem with the current head of the Fed, Jerome Powell, and its Vice Chairman for Supervision of the banks, Randal Quarles, both hailing from the infamous private equity firm, the Carlyle Group. We’re getting a good look now at how that’s working out for the American people.
It should be obvious to anyone paying proper attention that Summers is simply a mouthpiece for the one percent.