Obama: Time to Act

“My Papa dun told me” while growing up during the Great depression that I should always try to have a years pay in the savings bank. Eight to ten thousand dollars a year was about what the average person could earn thirty years ago. I had an account at the Emigrant Savings Bank.The other notable savings bank at the time was The Bowery.

During the hight of the depression the Glass-Steagall Act was passed by Congress. That legislation forbid savings banks from going into the investment business. Why? Because prior to 1933 banks were making investments in all kinds of adventures including the stock market. There were occasions when a bank would lend money to a commercial enterprise and then buy their stock. Obviously if the stock went down, the bank lent them more money to help boost their investment. That kind of behavior is what lead to the Glass-Steagall Act.

Unfortunately, in 1999 during the Clinton administration when he was promoting the “Third Way” dream, that Glass-Steagall Act was repealed. And guess what? The banks went right back to what they were doing prior to 1933 and started to do that very same crap all over again. Lets say that I had my years savings in Citi Corp. They would use my savings for all kinds of weird investments, including some new fangled stuff called derivatives. This might be a bundle of mortgages that some other bank sold to people who could no way afford to pay for them. Now it’s true that my savings of up to $100,000 would be secured by the FDIC (also passed during the Great Depression), but while that took care of me, it did not take care of the bank whose investments are now eating away at the heart of the banking system. The banks are not in a position to lend because nobody trusts anybody else. In a nutshell that’s our present dilemma.

During the campaign when folks were coming down hard on Obama, I wrote a blog titled “Cool It On Obama.” At the time I suggested that we give the man a while before we start going down his throat. Well, here I am about to go down his throat. Obama, you said it, “Take advantage of the crisis to create change.” Well here's something that was screwed up under Bill Clinton that needs fixing right away.

I don’t believe that Summers and Geithner have a hair on their collective heads that is interested in putting some brakes on their old Wall Street pals. Their frame of reference is the world of financial whirligigs. They simply don’t know anything else because they never spent time anywhere else. Oh yes, I am reminded of Summers at Harvard when he made that “sage” observation that “girls can’t do science.” Right there that should have alerted Obama to a man with a very limited view of the world. Hmmm, I wonder if he ever asked Michelle what she thought of Summers observation about the gender of scientists?

What does the President need to do now? He should call Pelosi and Reid over to the White House for lunch and just lay it on the line. You want Glass-Steagall to be resubmitted to the Congress and put on the fast lane to passage. It can be called the Schumer-Waxmen Act or whoever wants to sponsor it. The important thing is some action that makes clear that you are going to reign in the Wall Street jockeys who are smacking their lips for another go at a bubble market so they can get back to buying their Lamborgines.

One more thing Mr. President, I remember when as a middle-aged man I was going to college and I met some pretty smart teachers. When I suggested they might try to put some of their great knowledge into practice as a public servant, I was told on more than one occasion that “some teach and some act.” Mr. President, I know that you used to teach; but now, precisely because you are the President, it’s time to act. Lets get started with the reenactment of some controls over the bonus boys so the rest of us don’t have to bale them out again under the ruse “that we can’t let the banks fail.” I never understood why the average soul who bought a house and is now losing it, can be left to fail; but not the bonus boys who sank the banks. I keep scratching my head over that one.

Thanks Kate. N.H.W.Y.