“I'll tell you exactly why. I think that politicians—particularly now, in the aftermath of this crash—fear that anything they do will be held against them later if anything bad happens. Look at all the grief I got for signing the bill that ended Glass-Steagall. There's not a single, solitary example that it had anything to do with the financial crash. And in fact, a study done afterward said that the unified banks were actually slightly less likely to fail than either the commercial banks that overloaded on subprime mortgages, or the investment banks, like Bear Stearns, Lehman Brothers, and others.” (1)
Bill Clinton, the principle prevaricator and serial fornicator-in-chief, has recently been about the business of burnishing his legacy. Faced with criticism that actions taken by himself and his administration materially contributed to the economic crisis of 2007-08, Clinton has taken to defacing the historical record. First, as Wallace Turbeville, noted in his blog demos.org, “Owning the Consequences: Clinton and the Repeal of Glass-Steagall”:
“The financial crisis occurred because banks involved in trading had become massive, concentrated and interconnected in response to the repeal of Glass-Steagall’s separation…There were only five notable investment banks left in early 2008. Of those, two went down, a third (Merrill Lynch) survived only by a forced merger into Bank of America, and the fourth and fifth—Goldman and Morgan Stanley—were threatened with failure when they were converted overnight to universal banks. Converting to universal banks qualified them for FDIC insurance and the implicit support of the US government. The facts, such as they are belie the spin, the massive financial institutions proved if anything more vulnerable and those that survived did so only with the help of massive federal bailouts.” (2)
But more importantly was the blanket statement that “there’s not a single, solitary example that it had anything to do with the financial crash." Turbeville, who worked for Goldman Sachs and worked assiduously in the period leading up to repeal to save the New Deal law, thinks otherwise. But even granting the validity of the former President’s assertions Clinton, perhaps intentionally, quite misses the point entirely.
Even if you grant the assumption that repeal didn’t cause the crash, repeal did, for the first time since Glass-Steagall was enacted in the 1930’s, produce a financial crisis. That is, the recession and resulting dislocations put commercial banks at risk resulting in hundreds of banks closing down or selling out in a further concentration of economic power. Wells Fargo purchased Wachovia, Guarantee Bank folded and was bought out by Compass Bank as two noted examples.
It has amazed me, in recent years, how graduates of the most illustrious and celebrated universities in this country have been able to apply so limited a knowledge of our historical record. Prior to the Great Depression, as any cursory student of American History will attest, economic recessions or depressions were consistently accompanied by financial crises, each worse than the preceding, finally ending with the denouement of 1929. To remedy this the New Dealers built a firewall between commercial and investment banks so as to prevent the vicissitudes of Wall Street from eviscerating Main Street. The result was that for nearly 7 decades this country had experienced great prosperity punctuated by the occasional hard times as the ‘business cycle’ did its inevitable work. At no time, however, did the hard times bring on a financial crisis threatening the very foundations of the banking system. That, of course, changed.
One would have thought that, being a ‘Boomer’, and, therefore prone to short-term memory, that the Savings and Loan crisis in the late eighties would have sufficed to advise caution. But no, spurred by the Conservatives and eager to establish a ‘legacy’ Clinton went about ‘triangulating’ the Middle Class by repealing one of the signature bulwarks of the New Deal.
Clinton apologists would have us believe that old Bill, too busy or too distracted by scandal, was somehow dragged into this, finally presented with a bill that was so overwhelmingly approved by both houses of congress as to be veto-proof. This too is a besmirching of the historical record for as noted previously in these columns, once agreement was reached with the Republican majority, Clinton’s White House enthusiastically pushed the bill, declaring its passage upon signing to be one of the most significant pieces of legislation passed in decades. Oh Bill was out there, alright, repeating the usual palaver that this was a dawn of a new age, and that the antiquated old rules didn’t apply anymore to the ‘new economy’. Scoundrels always make those arguments as we serially come to believe that the old rules governing economics no longer apply. When these arguments hold sway, you must believe that certain attempts at financial levitation are soon at hand. And so it was. It took about a decade, about the mean time for these things to fully mature and, as predictable as the rise of the morning sun, Wall Street was soon knocking at the door hat in hand.
It is disingenuous to say the least for Clinton to parse the language, a propensity for which he has repeatedly demonstrated a remarkable talent. But with Hillary now on the hustings seeking the presidency in her own right, it is important for Clinton to burnish the record for Hillary, joined as she is at the hip, cannot put much distance between her candidacy and the legacy of the country’s first experiments with a Clinton in the White House. To now own that legacy is the challenge, even if it means not letting the historical record get in the way.--------