President Obama Declares War On The Banks, bawls one headline, presumably missing the days when it could stand urchin-like on street corners exhorting passers by to “Readallaboutdit” inbetween sniffs. President Obama, it seems, proposes to reinstate key elements of the Glass Steagall Act to restrain the banks, causing many to think that – at last! – he’s turned against them. The effect of Glass-Steagal (and the new legislation too, to an extent) is drawing a clear line between what we in Britain refer to as casino banking and high street, deposit banking. The point of this is that when the casino bank bets too far and goes broke, it isn’t any longer able to count your and my money, safely deposited with a separate company, as assets it can lose. We don’t all lose our money when the casino banks lose theirs, so the economy as a whole survives, in a much-abreviated nutshell. Glass Steagall was introduced after the Great Depression as a way of ensuring that another Great Depression never happened. Lobbying by the banks saw it repealed in 2004. Lo and behold, as we’ve seen another series of bank crashes followed, again imperilling the broader economy. Good old Obama for bringing back Glass-Steagall, then, eh? Phew!
Not really. It doesn’t address the heart of the problem at all, that the banks simply shouldn’t have the place in society that they do. Banks don’t lend money, they create it. A banking license isn’t a license to lend money, it’s an extension of the sovereign power formerly of the monarch, eventually surrendered to parliament, to create money out of thin air. We pay the banks a fee for this we call interest. When we have a government elected by the electorate to further and safeguard the interests of that electorate that can create money itself for free, it’s an absurd situation to even suggest that when we need money for funding a sound business proposal we have to go cap in hand to a third-party privately-owned bank and ask them to create money for us, incurring fees in the process. It’s nonsense, and the banks simply shouldn’t be in this entirely parasitic position. They give the community nothing, and in charging recurring fees for effectively doing nothing they endlessly cream off money that should be being spent towards the betterment of the community as a whole. They grow fat for doing nothing while the community suffers for no good reason.
Obama’s proposed legislation won’t do anything to change this. What it will mean is that the banks will once again have brought the greater economy to its knees, profited handsomely from the experience, and survived essentially intact to repeat the process in the future. A repeat of the earlier Great Depression scenario, in fact, as they were bailed out back then too. Obama’s proposed legislation leaves them free to repeat the experience again next century, sooner if they wish, if the economy has revived enough to make it worth their while. It’s not a punishment for the banks, it’s a gift, a lifeline – through this they’ll survive in place as they are to cripple us all financially another day.
I’ve said before that Obama is the bank’s puppet, a reader of press-releases, nothing more. His recent proposals do nothing to change that view. When he campaigned on the basis of change, he seems to have neglected he meant the kind of change that usually has plus ca attached to it.