Hang in there!

Image: Jennifer McKnight-Trontz

Hang in there!

Depression is a technical, financial term that may or may not apply today (remember: liars use/make/lie about numbers, so you can’t believe the numbers). Regardless, the current state of American life if hardly inspirational, so I’m going with the term. Now, before you stop reading this because it is too depressing (did I already lose you, Mom?), I’m not suggesting we are hopeless here. Instead, I am suggesting that we get all French Revolution on these sheißkopfs. I am sick of the American public being victimized by the plutocracy that runs this land and (I think) you are too! So instead of curling up into a ball, pick up a torch and storm the friggin’ Bastille with me, ok?

So, how did we get here and where is here (and where is the Bastille)? Well, here is actually teetering on the edge of the collapse of the American economy due to predatory lending practices, successful lobbying of Congress and failure to heed historical bellwethers of sound investment.

Shit, I just lost the rest of you, didn’t I? Don’t go, please. It gets good after the jump; I name names…

Thanks for making the jump! So, in case it isn’t clear what I’m even talking about, we’re dealing with the collapse of Bear, Stearns & Co. Inc., what was the fifth largest investment banking and securities trader in the United States. Without getting all nitty-gritty about it, they suffered what amounted to a “bank run” on Friday and had to seek emergency funding from The Fed to avoid insolvency. Not good. The result was a 90ish percent drop in stock price and takeover by JPMorgan for the equivalent of $2 per share. The secondary impact of this is unknown, but Lehman Brothers may get caught in the wake of this collapse and the ripples will surely be felt across the globe, not just on Wall St.

Ok, those are the facts and the business as usual. So how about some names? Let’s start with Glass and Steagall, as in the Glass-Steagall Act of 1933. Had this piece of legislation still been in place today, I wouldn’t be writing this piece. Sen. Carter Glass (D-Va.) was a former Treasury secretary and former U.S. Representative. As a Rep., he co-sponsored the Federal Reserve Act of 1913, placing him in a, shall we say, less-than-adversarial role with Big Banking, represented then as today by J.P. Morgan (natch JPMorgan Chase). Henry Bascom Steagall was the chairman of the House Banking and Currency committee in 1933 (Glass’ old position).

Long story short (for the long version, take a look at this Frontline timeline from 2003(!); muy excellente!), investigations following the market collapse in 1929 discovered that a significant cause of the Great Depression (1929-1941) were the conflicts of interest created when commercial banks are permitted to underwrite stocks or bonds.

In the early part of the century, individual investors were seriously hurt by banks whose overriding interest was promoting stocks of interest and benefit to the banks, rather than to individual investors. The new law bans commercial banks from underwriting securities, forcing banks to choose between being a simple lender or an underwriter (brokerage). The act also establishes the Federal Deposit Insurance Corporation (FDIC), insuring bank deposits, and strengthens the Federal Reserve’s control over credit.

Doesn’t this all sound familiar? Santayana was absolutely correct. Now, to the crux of this: After 20+ years of lobbying, the major investment banks finally got President Clinton and Congress to repeal Glass-Steagall in 1999. The effort was spearheaded by Sandy Weill of Travelers and Citicorp’s John Reed.

Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming [Citibank-Travelers $70 billion] merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, “You’re buying the government?”

Why does this make me mad? Riddle me this: where did The Fed get the $30 billion they guaranteed Bear Stearns with (the only way JPMorgan would touch them)? That’s right, from “our” collective back pockets. And though Bear Stearns execs don’t have the golden parachutes of their contemporaries, with their

double-trigger provision“, which means awards and all benefits are not accelerated unless the participant is fired without cause by the new company or resigns for a good reason.

I will not be holding my breath waiting to see what happens when they are let go by JPMorgan.

…JPMorgan Chief Financial Officer Mike Cavanagh late Sunday said taking over Bear would generate about $6 billion in merger-related costs.

JPMorgan has not broken down those figures, but much of that will be earmarked for severance pay and potential exit packages for top executives like Schwartz.

I want you to go stick your head out the window and scream at the top of your lungs, “I’m mad as hell! And I’m not going to take this anymore!”

(Via John, Henry, Frontline)