Security and Wall Street Bankers

In this article I want to address a continuing issue relative to our national economic security. While I realize that the focus here is about personal security and home security, specifically. I am taken with the information I have so far gleaned from news reports relative to the new bill being worked through the U.S. Senate. The bill, submitted by Senator Christopher Dodd (Democrat from Connecticut), regarding re-establishing government oversight through regulations that were previously used to keep our financial sector from going off the deep end as it has done since deregulation began in 1980 and continued through 2000 when literally the whole world was taken by a financial crisis that shook most economies to their very core.

I do not have the specifics of this bill yet since it has not been posted on the internet, and cannot even be discussed on the Senate floor owing to a U.S. Senate rule that essentially allows “tyranny by the minority” by requiring a vote of 60 Senators in the affirmative to even bring the bill to the floor for debate.

However, I have heard from persons on both sides of the aisle that like the health care bill that became law earlier this year, this bill is but a beginning and subsequent amendments or future bills will further the aim of eliminating the “casino” mentality that permeates Wall Street and the major bankers who create exotic financial instruments quite removed from public or government scrutiny, and which can only rarely be fully explained by the persons who often deal in these financial packages or instruments.

I have heard that playing both sides is not only common for the bankers and investment houses, it is the way they do business to ensure they will not lose in the long run. How is it that anyone can lay claim to this being a capitalist system based on free market principles if the game is rigged to provide security for the sellers of exotics who then buy insurance to hedge their bet either that these financial instruments will win or, as was the case during the latest meltdown, lose. In other words, those who sell the products cannot lose. They guarantee their ability to win and therefore make a profit even if the investments go under and fail.

Logically, there is nothing fair about this arrangement since it literally provides guarantees to the seller. It is a fixed game and only the investors stand to lose. The investors regardless of their financial savvy have lost and more than a few money managers have put assets they are responsible for at risk and have, in fact, lost billions. Whose money is it that is lost?

Try the pension funds for many organizations that are under a money manager who bought into these bundled investments and the investments failed. Did the money manager lose? No. The pensioners from the specific funds under management lost and future pensioners have lost much if not all of their supposedly secure funds.

How can anyone rig the system as a matter of “standard business practice” on Wall Street or by the investment banks and claim this is as it should be?

The Glass-Steagall Act and subsequent Banking Act of 1933 provided a structure and specific guidelines for how much risk an investment bank could take and further, it kept separate the commercial banks from the investment banks. And these were enacted to prevent a meltdown like that which occurred in the economic collapse of 1929. All of this has been undone over the last 30 years through deregulation. And with it has come exorbitant earnings by hedge fund managers who contribute no product nor anything tangible to the economy. They do not create jobs. They create wealth only, and the wealth is theirs for the keeping. So, in this land of the free, only the little guy is able to lose that which they spend a lifetime building. Only to have it stolen literally by some “fat cat” on Wall Street or an investment bank that has hedged its bet with insurance the virtually guarantees them a winning hand.

Apparently I misspoke when I claimed these people possess a “casino” mindset. More correctly, they should be called thieves, plain and simple. And it matters not that there is no current law that prevents such scams from be foisted on those persons who put their trust in money managers who are then in charge of their retirement savings.

This is immoral and unethical and should never be allowed again to occur. But it will, and you can count on it, because these same people are able to devise new financial instruments that skirt the rule of law and thumb their noses at the little people whose lives and futures hang in the balance.

We have laws against shake down artists and grifters and assorted other illegal actions for which arrest and trial are standard practice. However, where these hedge fund managers are concerned the rule of law is more a matter of inconvenience so they turn their hoards of attorneys loose to work around the laws and remove their client’s liability.

How can we have real concerns about our personal security when the very system people put their faith in is designed to wreak havoc on the same people the law and vis-a-vis the government is supposed to protect? This is quite the quandary, and one for which no simple answer seems an easy solution. Well, there is an easy solution: re-establish the Glass-Steagall provisions and the Banking Act of 1933. In so doing, we will once again have limits on the amount of risk bankers can take relative to their cash reserves and there will once again be a wall that separates the commercial banking industry from the financial banking industry.

These provisions worked from 1933 to 1960 to provide our nation the greatest economic expansion the world had ever known. Now, our nation and the people who have been the driver for this economy are languishing. While the public moneys the went to prop up the horrific wave of bad debt that occurred when the housing market bubble burst and loans went into default by the millions is kept at the top and not being loaned to small businesses to enable them to rehire the tens of millions who lost their jobs because of the economic collapse. The wealthy are not the driving force behind the U.S. economy. The middle class was, but it has been decimated while the few create ever-increasing amounts of personal wealth and add nothing to the economy.

Unless these same wealthy people learn and come to understand the lessons of history, they will not only repeat and destroy the very system that allowed their behavior to continue, they will do so in spades. When the government goes belly-up, to whom do they think they will turn next?

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