Gambling With Your Money

“I am shocked, shocked, to find that gambling is going on in here!”

— Claude Rains as Captain Renault in Casablanca

Voter discontent, including that of the “Tea Party,” has to cut itself loose from the reckless Republican politics of the last forty years if the nation is to survive the economic catastrophe its gambling has led us into.

The recently elected poster boy beneficiary of protest voting, Republican Senator Scott Brown of Massachusetts, is still marching to the tune of the Republican politics that fathered our currently marauding economic monster.

According to John Cassidy’s article, “The Volker Rule” in the July 26, 2010 issue of The New Yorker, Scott Brown, as the price of his critical sixtieth vote to prevent a filibuster of Financial Reform legislation, demanded and obtained changes that plowed a gaping hole in that legislation’s prohibition of banks entrusted with our federally insured checking and savings account deposits investing their capital in risky hedge funds and private equity funds.

These restrictions on “commercial” banks (checking and savings account deposits) distinguish them from riskier, private “investment” banks like Goldman Sachs (trading in stocks and bonds) was a cornerstone of the Glass-Steagall Act passed by Congress in 1933 without a single dissenting vote. It responded to Congressional hearings disclosing outrageous financial abuses that led to the Great Depression of the 1930s. In 1999, the Glass-Steagall Act was described as “archaic” by Alan Greenspan, then chairman of the Federal Reserve Board, and was repealed by a Republican Congress.

October 23, 2008, the chairman of the House Committee on Oversight and Government Reform, Democrat Henry Waxman, after quoting a lot of Greenspan’s former statements urging deregulation of our financial institutions, asked Greenspan, “Were you wrong?” To that question, Dr. Greenspan replied:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting . . .their equity in the firms. . . . The problem [is that] something that looked to be a very solid edifice, and, indeed, a critical pillar to market competition and free markets, did break down. And I think that . . . shocked me. . . .” (As reported in John Cassidy’s book, How Markets Fail, Farrar, Straus and Giroux, 2009)

Shocked or not, Dr. Greenspan and most professional economists involved repented their mistakes.

Disenchanted voters, however, including Tea Party supporters, may be excused for being unaware of the foregoing history, but not unrepentant Republican congressmen and senators, including Senator Scott Brown.

photo credit: flickr, Jerry Paffendorf