Here now the comment:
I had to laugh because Ann Coulter was on Fox News telling the viewersYes, more slanted, biased reporting found on Fox. This comment's description of Ann Coulter is also comical if not mildly accurate.
that Bush allowed Lehman to fail and that Obama was responsible for
bailing out Goldman and AIG. I would like to correct that statement on
behalf of the mildly retarded Coulter, because it was actually Henry
Paulson, former Goldman CEO, who planned out - in conjunction with Tim
Geithner - who was head of the NY Fed at the time - the game plan to let
Lehman collapse and then devised the plan to bailout Goldman Sach and
the other big banks who were catastrophically exposed to AIG - along
with the scheme to have the Government takeover AIG. All this was
set-up before Obama took office, although recall that Obama and McCain
suspended their campaigns to help devise this plan. Geithner - despite
being a confirmed tax cheater/dodger - was inserted into the Treasury
Secretary position in order to oversee the implementation of the plan
devised under Bush."
It is important to understand where these problems really began. In reality it could be said that it began during the Clinton Administration and the repeal of the Glass Steagall Act (GSA) in 1999. Below you will find a good explanation of the GSA, the why, the when and the who.
That said, our comment of the day speaks loudly as to the partisanship that exists in this country today. Like a religion, people hang on to their beliefs with closed minds. Each side sees their side of things truly eliminating the reality in favor of promoting a possible "win".
Like her (Ann Coulter) or not ( I do not) - she does command an audience out there and supposedly functions as a reporter/journalist/author. Any of which should allow for more truth and reality not one ill focused views. However, it is not the first time I have heard all the blame put onto our current President Obama whose change we can believe in policy proved to me that if we truly want change it must come from the masses who must organize against the classes (Occupy Wall Street).
For what ever reason in our country today, failed policies are continued on and passed from one administration to another even with a change in political party control. Perhaps, just perhaps, the sci fi depictions of corporations taking over control of the world is becoming the true reality.
What is real important to understand is that our current problem is owned by both the Democrats - past and present - as well as the Republicans - past and present. So our readers comments offering up an explanation to the alleged statements by Coulter via Fox is valid.
While talking about truth and reality, I must admit that I did not personally hear or see the FOX report referred to in today's comment of the day. So I must offer this disclamer.
The views and comments expressed by our reader in the comment of the day are those of that reader. These views and comments are not verified nor endorsed by GoldmanSachs666.com, this writer nor any of the GS666 staff and volunteers.
What was the Glass Steagall Act (GSA)?
In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities. At the time, "improper banking activity", or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors' money. Additional and sometimes non-related explanations for the Great Depression evolved over the years, and many questioned whether the GSA hindered the establishment of financial services firms that can equally compete against each other. We will take a look at why the GSA was established and what led to its final repeal in 1999.
Reasons for the Act - Commercial SpeculationCommercial banks were accused of being too speculative in the pre-Depression era, not only because they were investing their assets but also because they were buying new issues for resale to the public. Thus, banks became greedy, taking on huge risks in the hope of even bigger rewards. Banking itself became sloppy and objectives became blurred. Unsound loans were issued to companies in which the bank had invested, and clients would be encouraged to invest in those same stocks.
Effects of the Act - Creating BarriersSenator Carter Glass, a former Treasury secretary and the founder of the U.S. Federal Reserve System, was the primary force behind the GSA. Henry Bascom Steagall was a House of Representatives member and chairman of the House Banking and Currency Committee. Steagall agreed to support the act with Glass after an amendment was added permitting bank deposit insurance (this was the first time it was allowed).
As a collective reaction to one of the worst financial crises at the time, the GSA set up a regulatory firewall between commercial and investment bank activities, both of which were curbed and controlled. Banks were given a year to decide on whether they would specialize in commercial or in investment banking. Only 10% of commercial banks' total income could stem from securities; however, an exception allowed commercial banks to underwrite government-issued bonds. Financial giants at the time such as JP Morgan and Company, which were seen as part of the problem, were directly targeted and forced to cut their services and, hence, a main source of their income. By creating this barrier, the GSA was aiming to prevent the banks' use of deposits in the case of a failed underwriting job.
The GSA, however, was considered harsh by most in the financial community, and it was reported that even Glass himself moved to repeal the GSA shortly after it was passed, claiming it was an overreaction to the crisis.
Building More WallsDespite the lax implementation of the GSA by the Federal Reserve Board, which is the regulator of U.S. banks, in 1956, Congress made another decision to regulate the banking sector. In an effort to prevent financial conglomerates from amassing too much power, the new act focused on banks involved in the insurance sector. Congress agreed that bearing the high risks undertaken in underwriting insurance is not good banking practice. Thus, as an extension of the Glass-Steagall Act, the Bank Holding Company Act further separated financial activities by creating a wall between insurance and banking. Even though banks could, and can still can, sell insurance and insurance products, underwriting insurance was forbidden.
Were the Walls Necessary? - The New Rules of the Gramm-Leach-Bliley Act
The limitations of the GSA on the banking sector sparked a debate over how much restriction is healthy for the industry. Many argued that allowing banks to diversify in moderation offers the banking industry the potential to reduce risk, so the restrictions of the GSA could have actually had an adverse effect, making the banking industry riskier rather than safer. Furthermore, big banks of the post-Enron market are likely to be more transparent, lessening the possibility of assuming too much risk or masking unsound investment decisions. As such, reputation has come to mean everything in today's market, and that could be enough to motivate banks to regulate themselves.
Consequently, to the delight of many in the banking industry (not everyone, however, was happy), in November of 1999 Congress repealed the GSA with the establishment of the Gramm-Leach-Bliley Act, which eliminated the GSA restrictions against affiliations between commercial and investment banks. Furthermore, the Gramm-Leach-Bliley Act allows banking institutions to provide a broader range of services, including underwriting and other dealing activities.
Although the barrier between commercial and investment banking aimed to prevent a loss of deposits in the event of investment failures, the reasons for the repeal of the GSA and the establishment of the Gramm-Leach-Bliley Act show that even regulatory attempts for safety can have adverse effects.