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Is Obama a captive of America's most powerful banks and corporations?

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Candidate Obama repeatedly blasted Phil Gramm and the Gramm-Leach-Bliley Act, which Gramm had pushed through Congress with President Bill Clinton's support. This was legislation that repealed the Glass-Steagall Act http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act

and thereby radically deregulated the financial industry, allowing hundreds of billions of new profits to be made by Wall Street, at great cost to the American public.

But now John McCain and Sen. Maria Cantwell, D-Wash. have sponsored a bill to repeal Gramm's bank-friendly legislation, while captive Obama seeks to preserve it!

The Gramm legislation, which permitted the merger of investment and commercial banks into too-big-to-fail corporations (including Citigroup and AIG, two financial giants that had to be bailed out by taxpayers), was thought by Obama the candidate to be a key cause of the meltdown. But as president, Obama's views did a "180" turnabout and he reappointed the Clinton-era officials who had sided with Gramm in ending sensible banking regulations that had protected the American public from predatory capitalism for 70 years.

Rather than restore Glass-Steagall, the Obama-backed banking regulation bill (which was passed last month by the Democratic majority in the House) went along with the desire of Wall Street lobbyists to a) prevent the breakup of the big conglomerates and b) block any control of their massive trading in the derivatives that has proved to be so toxic.

The result, with some deceptive reformist window dressing, is a pro-Wall Street business-as-usual cop-out, and the Senate version is likely to be more of the same.

Fortunately, there is a better way, and thanks to the McCain-Cantwell bill and a companion bill authored by Rep. Maurice Hinchey, D-N.Y. in the House, there is still a chance at serious financial regulation through the restoration of the key provisions of Glass-Steagall.

How odd that it now remains for John McCain to stand up to the oversized and overly powerful banks:

"I want to ensure that we never stick the American taxpayer with another $700 billion--or even larger--tab to bail out the financial industry," McCain proclaimed in introducing his legislation. "This country would be better served if we limit the activities of these financial institutions."

As we all know, just the opposite had happened under the great bailout: The big investment houses of Goldman Sachs and Morgan Stanley were allowed to suddenly attain the status of commercial banks in order to qualify for federal bailouts, and the once staid commercial Bank of America was encouraged by the Fed to buy out the investment house Merrill Lynch. As a result, banking has never before been concentrated in so few hands. As Rep. Hinchey put it:

"Today, just four huge financial institutions hold half the mortgages in America, issue nearly two-thirds of credit cards, and control about 40% of all bank deposits in the U.S. In addition, the face value of over-the-counter derivatives at commercial banks has grown to $290 trillion, 95% of which are held at just five financial institutions. We cannot allow the security of the American economy to rest in the hands of so few institutions."

Those derivatives, that hodgepodge collection of securitized debt--including mortgages of most American homes--are at the heart of the problem, and they are not regulated in any significant way by the legislation supported by the Obama administration. And that's not surprising, since Larry Summers, the president's top economic adviser, was not only a key proponent of reversing Glass-Steagall in the Clinton White House, but also supported the Financial Services Modernization Act, passed a year later, which summarily exempted those suspect derivatives from any regulation.

Although Obama has blasted "fat cat bankers on Wall Street," it's time for those who elected him to ask for more than rhetoric -- and to ask that of the Democratic leaders of the House, who refused to allow a vote on Hinchey's amendment to include the restoration of Glass-Steagall in their so-called Wall Street Reform Act.

Forced to introduce it as a separate bill, Hinchey decided to reveal the bald truth:

"The repeal of the Glass-Steagall Act was done to help large banks become enormous and to line the pockets of banking executives with more money than most Americans could ever dream of earning in their lifetime. My bill would help right the ship and return our country to the days when banks either participated in commercial lending activities or investment activities, but not both."

There are very good and rather obvious reasons for preventing commercial banks (which, insanely, are now allowed to carry the hard-earned savings of depositors and a federal guarantee of their worth) from engaging in the high-roller risk-taking of investment banks.

If even John McCain now understands this, one must ask why doesn't President Obama? The answer is that Obama is essentially a captive of the large financial institutions that can easily destroy his bid for a second term in the White House if he doesn't comply with their wishes.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always (more...)
 
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'nuf said ... by FAITHCARR on Thursday, Jan 7, 2010 at 11:39:25 AM
Obama is not a victim here.... He is complicit. He... by richard on Thursday, Jan 7, 2010 at 11:39:45 AM
I think he's been co-opted the same way Clinton wa... by Richard Clark on Thursday, Jan 7, 2010 at 11:54:41 AM
He would also not be in had he not received the vo... by Dennis Kaiser on Thursday, Jan 7, 2010 at 5:02:31 PM
quite get the Frat Boy/Girl Party of the New World... by shadow dancer on Thursday, Jan 7, 2010 at 4:09:47 PM
I watched Obama speak today, live. I looked into h... by Steven G. Erickson on Thursday, Jan 7, 2010 at 10:55:27 PM
Get commercial banks out of the investment busines... by Dick Thomson on Thursday, Jan 7, 2010 at 12:19:34 PM
Is Obama responding to our needs as Progressives? ... by Paul from Potomac on Thursday, Jan 7, 2010 at 12:39:27 PM
Younger folks won't remember this, but back in the... by Edward Ulysses Cate on Thursday, Jan 7, 2010 at 1:33:46 PM
Younger folks won't remember this, but back in the... by Edward Ulysses Cate on Thursday, Jan 7, 2010 at 1:34:48 PM
Apologies for the double posting.All I did was hit... by Edward Ulysses Cate on Thursday, Jan 7, 2010 at 1:38:57 PM
Of course Obama isa captive of America's most powe... by PrMaine on Thursday, Jan 7, 2010 at 3:49:27 PM
It is so odd that these very discussions even "hap... by boomerang on Thursday, Jan 7, 2010 at 6:06:25 PM
Without even having read the article the answer is... by Nick van Nes on Thursday, Jan 7, 2010 at 6:42:57 PM
appears to have worked FOR or WITH the CIA does th... by richard on Thursday, Jan 7, 2010 at 7:48:25 PM
beings left simple tribal living to form Nation/St... by shadow dancer on Friday, Jan 8, 2010 at 12:13:10 AM
Its going to take a lot more than a moderate membe... by Bryan Emmel on Friday, Jan 8, 2010 at 2:53:31 AM
Contrary to what the article says (and to what pro... by Perry Logan on Friday, Jan 8, 2010 at 5:22:17 AM
Despite the fact that I never had any enthusiasm f... by Blaine Kinsey on Friday, Jan 8, 2010 at 10:37:07 AM
Do you remember when Jimmy Carter tried to rein in... by Matthew Peters on Friday, Jan 8, 2010 at 9:02:08 AM
http://www.opensecrets.org/pres08/summary.php?id=n... by Richard Clark on Friday, Jan 8, 2010 at 12:04:36 PM
Your article was very good, but the fact that 88 p... by Blaine Kinsey on Friday, Jan 8, 2010 at 2:13:23 PM
Clinton wasn't a sellout? Can you say NAFTA? just ... by B York on Friday, Jan 8, 2010 at 12:12:36 PM
No he is not a "captive." That implies this is inv... by Miriam Callaghan on Friday, Jan 8, 2010 at 1:01:05 PM
The massive protests is in fact what caused the en... by Philip Dennany on Friday, Jan 8, 2010 at 1:25:49 PM
It might be easy to believe that he is controlled ... by Michael Lee on Friday, Jan 8, 2010 at 7:15:28 PM
is how different this meltdown isfrom the one in t... by Margaret Bassett on Friday, Jan 8, 2010 at 9:50:10 PM
We can't begin get back the trillions that the Fe... by Richard Clark on Sunday, Jan 17, 2010 at 10:59:55 AM