It's About Coalitions Not Purity, Part Thirty

"The Clinton Era and the 1990s Near An End"

During 1996, Congress and the President again crossed swords, this time over welfare reform. Some Republicans wanted very strict limits for the program, and the President vetoed a couple of attempts to impose such strong limits on the system, but negotiations produced a compromise bill passed by Congress and signed by the President which had a provision to require work, termed "Workfare," as a part of the new law.*

In the late 1990s, Republicans, along with some Democrats, pushed for deregulation of the banking industry by removing the "Glass-Steagall Act," a law, implemented in the era of the Great Depression, to prevent the mixing of investment banking (also termed "casino banking," as it can be highly risky) from "traditional" banking; that is, savings and checking accounts, car loans, etc. Democrat-turned Republican Phil Gramm, a senator from Texas, led the charge for the deregulation, which was then signed by President Clinton.**

Anti government sentiment had been on the rise, certainly not discouraged by conservative attacks on government at all levels, and the sentiment came accompanied by hate groups and fascist-like militia extremists. In 1995 a terrorist bomb attack on the Federal Building in Oklahoma City killed more than 160 and injured nearly 700. The main perpetrator, Timothy McVeigh, had ties to militia groups and seemingly hated the government over issues like taxes and gun control.***

Late in Clinton's presidency, he concentrated on trying to get an agreement between Israel and Palestinian leader Yasser Arafat, a festering sore and the source of world tensions for decades. The President met with the opposing sides, and after hopeful signs, the situation deteriorated, leaving the matter to continue to this day.****

Next, "The Contentious 2000 Election"

* The number of welfare recipients dropped thereafter, but the economy was steadily improving in the mid to late 1990s and the effects of trade agreements had not really fully hit home. Those agreements, in my opinion, cost many workers jobs, as operations shifted overseas. Coupled with technological changes, which also replaced many workers, these two things brought a later rise to welfare rolls in various forms, as well as a rise to poverty numbers. 

** In my opinion, this legislation had much to do with the financial collapse in 2008, the pressure for which continued to build during George W. Bush's time in office, and also led to the bank bailouts, trillion dollar deficits, and the almost catastrophic demise of the economy, a situation we have not fully exited even to this day. I don't recall the show ("maybe" The Today Show?), but in about 2009 or 2010 Bill Clinton actually said he regretted signing this legislation, but advisers like Bob Rubin, who had strong ties to Wall Street banks, urged him to sign it. Clinton's "admission" almost led old Randy to fall off of his seat. I give Republicans lots of hell, but I don't let Democrats off the hook for shameful mistakes.

*** As is so often the case, one thing leads to another, and the Oklahoma City bombing also traces back to a 1993 incident in Waco, Texas, but all of this is far beyond the scope of this article. For those interested, there are many sources on the subject, so check out your local library.

**** The Israeli-Palestinian conflict is far too complex for this article, so again, please go to your local library and see what sources they have available, which I'm sure will be substantial.
 
WORD HISTORY:
Hop-This is the verb meaning "to jump, to leap, to dance, to spring," and the derived noun meaning "a short distance jump." "Hop," the plant, usually in the plural, "hops," is assumed to be from another source. At first I didn't really buy this, but even some German sources have it, so I'll say it this way, hop "may" go back to Indo European "kheub," which had the notion of "to bend/bow." This gave Old Germanic "hup(p)ojanan," with the meaning "to spring, to leap, to jump, to dance." If the tie to Indo European "kheub" is correct, the Old Germanic meanings "may" come from the notion of stooping/crouching over before you hop/jump, with similar for dancing (we're not talking about "slow dancing, swaying to the music," here). The Germanic form is possibly the source of English "hope," and its relatives in the other Germanic languages, with the idea being "jump for joy at anticipation of positive news or events" (the history for "hope" was covered in Part 29 of this series on coalitions). Anyway, the Germanic form gave Old English (Anglo-Saxon) "hoppian," with the same meanings. This then became "hoppen," before the modern version. The noun was derived from the verb. The other Germanic languages have the following verb forms: standard German "hüpfen," some German dialects "hoppen" and "hupfen," Low German Saxon "hüppen," Dutch "huppen/hoppen," Icelandic "hoppa," Danish "hop," Norwegian "hoppe," and Swedish "hoppa." Apparently West Frisian doesn't use a form in the modern language; at least I could not find one.

That Loud Squeal You Hear

I originally published this in January 2010 

 

That loud squeal you hear is from Wall Street bankers. We're about to find out if President Obama "gets it." We'll also find out how many Democrats AND Republicans "get it" in both houses of Congress. The President is supposed to announce new proposals to curb Wall Street and the "anything goes" philosophy turned loose on the American public by Republicans, but aided and abetted (even urged) by some Democrats over a decade ago. From what I understand, the proposals will move the country back toward the Glass-Steagall Act that separated traditional banks from investment banks; that is, banks that take lots of risk. Further, some "fees" will be imposed on the banks and possibly the bankers. Oh my...it's got to be tough contemplating how to get by on 40 million a year rather than 50 million, and boy would many of us like to find out how tough it is, for even less than that amount.

This President has shown that he can be pushed and shoved around, by both Democrats and Republicans, but let's see if he finally takes a stand on something and doesn't give away the store because of nasty rhetoric from some opponents. Proposals to curb the banks need to be supplemented by curbs on commodity speculation, especially in such essentials to the very survival of the nation as oil and gasoline. I'll throw in natural gas, too, for I see T. Boone Pickens is running new ads about switching many oil using items over to "plentiful" American natural gas. I've said here before that Pickens is using his own money to promote turning us away from oil (much of it imported from countries that don't exactly invite us to birthday parties), and I have to give him a big hand for that, but I just don't trust the "inve$tment cla$$," better known to me as the "sit on their ass class." Once we switch, or probably once we commit to switching many things to natural gas, the "plentiful" part will disappear, and we'll be told, "There's a serious shortage of natural gas and you'll be paying double...no... triple (do I hear quadruple?) what it costs now."

All of this will test many Republicans, too. Will those bulwarks of "free markets" turn against their philosophy? Will the threat of regulation of the financial system bring cries of how the Republic is about to end? This could get interesting.

McCain Steps Up To The Plate

Finally!!! John McCain has returned once again as the guy many Americans, including many in the media, fell in love with in 2000. McCain, a Republican, has joined forces with Maria Cantwell, a Democrat, to propose legislation to restore some sense of sanity to the banking system. Their idea isn't new; rather it is about 76 years old. By proposing such legislation, McCain is making the admission that at least part of Franklin Roosevelt's New Deal was effective. What is this proposal, you ask? (Ah, you DID ask, didn't you?) It is a proposal to reinstate the "Glass-Steagall Act of 1933." This law kept commercial banks in their traditional banking role. It prohibited banks from using depositors' money in casino-like ventures and investments. That role was left to investment banks. The law worked, too! It worked so well for decades that some "free market" conservative (libertarian?) politicians couldn't stand it! As wealthy investors (better known to me as, "the sit on their ass class") gained political strength since the early Reagan years, one of their best front men, Phil Gramm, a conservative Texas Democrat turned Republican, took a lead position in dismantling this regulatory law.

You remember Phil, don't you? About six months before the final plunge of the economy in 2008, old Phil declared that there was nothing wrong with the American economy except that "Americans are a bunch of whiners!" I tell ya, I was so hurt, I couldn't stop sobbing all day. With his statement all over the news, just days later old Phil stepped down as the chief economic advisor to the presidential campaign of.......John McCain!

Now, old Phil was not alone in his efforts to return the country to pre-Depression lack of regulation, no siree! Most, if not ALL, congressional Republicans voted for the measure, but they were joined by a number of Democrats, and enjoyed the support of the Clinton economic team, including one Larry Summers. Let's see...where have I heard that name lately? Oh! He's the Obama Administration's economic advisor!

At least McCain has seen the damage wrought by the lack of regulation and is now attempting to rectify matters. So, government DOES have a role! What is particularly troubling is that this rectification has not been sought by the current administration! I've been telling you folks, too many Wall Streeters in the Obama Administration!

Don't assume that the McCain-Cantwell proposal will pass both houses of Congress and be signed into law by the President, as that would make too much sense and be much too easy. The long arms of the bankers and the "sit on their ass class" will undoubtedly do just about anything to stop such common sense legislation, and they will rely heavily upon their many Republican allies to go to the mat for them; so, this is far from a done deal. Throw in some campaign contributions by the above mentioned to key congressional Democrats and this legislation may never make it onto the floor of either house. I've been preaching here for several years that WE have to step up and put the heat on the politicians of BOTH parties, in order to get our country back from the wealthy interests. With OUR help, maybe McCain and Cantwell can get this legislation passed. If that happens, I guess we can forgive McCain for giving old Phil such a high-level position in his presidential campaign. Now, as for forgiving him for selecting Sarah Palin as his running mate, NO WAY, Jose!

WORD HISTORY:
Tarnish-I can't trace this word back to some Indo European base, but I could swear I've seen such somewhere in the past. English got this word in the late 1500s from a form of French "ternir," which meant "dull, dim, lack brightness." This form had developed from French "terne," which meant "dark, dull, lacking brightness." French got the word from Frankish, a Germanic language/dialect. Old Germanic had "darnijaz," which had the notion of "conceal, hide, darken." This gave Old English "dyrnan," which meant "to conceal, to darken." (From what I found, another form in Old English, "dierne," meant "obscure.") In that same time period of long ago (600-800 A.D.), Old High German had "tarnjan," with the same basic meaning, and Old Saxon, the Germanic dialect that remained in northern Germany after part of the Saxons left for Britain, had "derni." It "seems" that the word form died out in English,* except for a distant relative form, "dark," and that English acquired our modern form "tarnish" from French. Modern German still uses the basic form as "tarnen," which means "to camouflage, disguise." In English, the verb form came first, followed by the noun about a hundred years later.

* I say "seems," because one never knows about these things, as many common people could not read nor write in those times, but old words long abandoned by the educated folks remained in use by these people, often in relatively isolated rural areas.

Understanding The Crisis, Part Three

I hope that all of you will try your best to follow this series. I also hope that I’ll explain things in a way that you can understand them, although certain aspects can be VERY complex. I know, too, that there is some really DRY stuff here, but please try to stick with reading it, as it is all VERY important, as I’m sure Congress and members of BOTH parties will be trying to assess what has happened in recent times, and to then put in place new laws to govern banks and various investments.

During the Great Depression of the 1930s, banks failed by the thousands. In an effort to prevent, or to at least control, such things from happening again, the Glass-Steagall Act was passed and signed into law in 1933.*** First, it established the Federal Deposit Insurance Corporation (better known to most of us as the “FDIC”), which insured bank deposits (then up to a limit of $100,000, which was quite a sum for those times); that is, if you had $5000 in a bank and that bank collapsed, you still got your $5000 back. Why would this help? Okay, one of the reasons for bank failures was “a run on the banks;” that is, many people were fearful of losing their money, sometimes their life savings, from a failing bank, and they withdrew their money. Now, there’s no question that some banks were shaky for a variety of reasons, but when a few banks collapsed, it caused even “healthier” banks to fail, because depositors withdrew their money. In such situations, even rumors (whether true or false made no difference) could cause bank failures, because depositors were terrified of losing their money, and thus the fear of a bank collapsing brought about the reality of that bank collapsing. With deposits insured, and the public aware that they could get their money even if their bank failed, it was hoped that “panics,” with mass bank withdrawals, could be curtailed, or even stopped, thus preventing the collapse of “healthy“ banks.

The new law also gave more power to the Federal Reserve in regulating interest rates, but that’s another matter. Further, “Glass-Steagall” separated banks into commercial banks and investment banks, with rigid barriers against mixing the two. Part of the reason for the Depression was seen by many, but not all, as banks having gotten too involved in investments in the stock market (including “speculation“ in stocks), for one thing. In those pre-Depression times, many banks often had brokerage departments, which often issued various securities, including stocks and bonds for corporate clients, while the rest of the bank took care of the more traditional banking roles of deposits and lending. By assuming so much risk in the brokerage area, investments gone sour could pull down the whole bank, rather than just the brokerage part. So what does this mean? Well, let’s say that you have your life savings in bank XYZ. The bank also has a brokerage unit which takes a major hit during “The Crash.” The losses from the brokerage unit have to be covered by the whole bank, not just the brokerage part. Ahh...cough, cough....guess whose money is now at risk?

Further, collapsing banks, the resulting jobs losses and the financial losses to depositors fed into the “depression” mentality that kept the downward spiral going, and as mentioned above, often caused mass withdrawals from other banks, even though some of those banks might have been sound, causing these banks to either fail or teeter on the brink. So you see, there was kind of a chain reaction. When you hear, “Your money is safer under your mattress, than in a bank,” this is more or less what is meant.

I won’t get into too much more on this part of the subject, but there were additions to the Glass Steagall Act made later in the 1950s, prohibiting bank holding companies that owned two or more individual banks from buying banks in another state.+++ Further, these bank holding companies were restricted to more or less traditional banking practices and restricted banks from the insurance business .

Many bankers didn’t like the laws, and over time, there were attempts to get aspects of the laws changed or repealed, with more intense efforts beginning during the Reagan years. In 1987, the Federal Reserve Board voted to loosen restrictions on some banking activities, including the issuance of....“mortgage backed securities.” Then Fed Chairman, Paul Volcker, dissented, fearing that banks would lower the standards for loans, then market shady loans to the public, all to make money from these securities they would then sell. (See Part One, for the basic workings of the mortgage lending business) Also in 1986/1987, the Fed broke the precedent of Glass-Steagall by allowing banks to again engage in certain limited investment activity, but limited such activity to no more than 5% of their gross business. In 1989, the Fed, now under Alan Greenspan, a strong advocate of deregulation, increased the percentage to 10%, and in 1996, to 25%. Gradually the banking laws were being dismantled.

In 1999, Senator Phil Gramm (R-Texas), Rep. Jim Leach (R-Iowa) and Rep. Tom Bliley (R-Virginia) introduced a measure in Congress that would effectively repeal much of “Glass-Steagall.” It permitted banks to outright own investment firms and insurance companies. The basic bill, also known as “The Financial Services Modernization Act,” had the support of the Clinton White House and Treasury Secretary Robert Rubin.^^^ The first vote in the Senate was 54-44, with 53 Republicans and one Democrat voting for the bill, and 44 Democrats against. The House passed a somewhat different version by voice vote; that is, there was no roll call to indicate how individual members voted. The bill went to conference committee to get an agreement between the two versions and the final bill was then passed by the Senate 90-8 and by the House 362-57. Clinton signed the bill into law. The walls between various financial sectors were shattered.

To be continued...

(No "Word History" this time)

***This was actually Glass-Steagall #2, as a previous act was passed in early 1932 and was known by the same name.
+++One could certainly argue that this prevented any banks or bank holding companies from becoming “too big to fail.”
^^^Rubin was a former exec of Wall Street investment firm "Goldman-Sachs." Not long after Glass-Steagall was repealed, he went to work for one of the beneficaries of the new law, Wall Street financial conglomerate "Citigroup." Hmm, now you people don't think....there could have been some tie....oh come on!!! You folks are cynical!!! (But so am I!)