Date: Sat, 6 Nov 1999 12:56:24 -0600 From: t-frank-3 at alumni.uchicago.edu (T. C. Frank)
I think it was Doug who wrote, in regards to the recent repeal of Glass Steagall:
>Look, I think it's time that folks on the American left, such as it
>is, rethought their relationship to the inherited wisdom of populism,
>one of whose sacred tenets is that a fragmented financial system is a
>beautiful thing. This is supposed to encourage dispersion of
>ownership and power. Has it? If so, why is the U.S. the most
>polarized society in the First World, with a long history of
>financial crises? Why is it that most social democratic countries
>have more concentrated financial systems than ours? Why is it that
>the EU, as part of its war on the welfare state, is moving towards a
>more American style financial system?
>
>Doug
And then:
I think the heavy breathing about
>it is way overdone, and the theoretical arguments against it aren't
>very persuasive. If there's a left position on institutional
>arrangements in finance, I think it'd be to create public and
>cooperative institutions capitalized through a tax on the big guys.
>
>Doug
What I'm wondering is if there even *was* any "heavy breathing" about the thing. I would be astonished to hear that there was even a debate. I would be more astonished still to hear that anybody in a position of public prominence trotted out the old leftist anti-bank language in that debate.
As for "populism," it seems to me that all the populist language these days is on the other side: To read financial industry comments about Glass Steagall, you'd think it had been drafted by a bunch of highfalutin aristocrats out to cheat the common people of their rightful return. There also can be little doubt about the political victors in this case. To the banking industry Glass Steagall's repeal has always symbolized a triumphant reconquest of the territory they lost in the Thirties to that hated fucker, FDR. I strongly doubt though, regardless of their populist rhetoric, that the people who have worked for the law's repeal all these years are aiming for a more democratic banking system.
I'd be the last person in this discussion to defend the particulars of Glass Steagall. I don't really even know what they are, except for FDIC (and is this going to disappear, does anybody know?). I think Doug is almost certainly right that a properly regulated, closely controlled central bank is preferable to a fragmented, localized system. I also know, however, that Glass Steagall arose out of precisely the kind of popular enthusiasm for regulation and control -- and popular disgust with Wall Street and Citibank in particular -- that Doug seeks to encourage in his own writing. Maybe it was ill-crafted and even wrong-headed, but it still marked a high tide of leftist sentiment in this country, and even if the law's provisions cannot be defended, its intentions deserve to be.
Instead what we get is an endless slamming of the accomplishments of the Thirties as backwards "depression era" thinking and a president and a congress who have acceded to industry's every wish -- doing so in the name of the almighty common people, united in their quest for higher returns. Feeble and fucked-up as the various regulations, controls, and welfare state implements that were passed in the Thirties and Sixties no doubt are, I would rather not celebrate their repeal until our team is the one doing the repealing, until they can be replaced with improvements like the ones that Doug specifies. It seems that the way things stand now, the financial industry has won a great historical victory, and on its own terms. It's not our doubts about Glass Steagall that prevailed but theirs. I guess my point (nostalgic and culturist as it is) is this: All the particulars of the law aside, the repeal of G-S represents an ideological ass-kicking for the left of historic proportions. Am I wrong?
Our only hope now, it seems to me, is that the banking industry will consolidate and defraud like mad until it brings on some final crisis a la 1929, that the ensuing crash and burn will bring about mountainous public outrage, that the new version of the Pecora committee will be the Henwood committee, and that we will then finally get proper banking regulations. But that strikes me as exceedingly unlikely.
Tom Frank