Glass Steagall Act - 1933 to 1999 - FDIC--SEC
An Act passed by Congress in 1933, that prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities.
The Glass-Steagall Act was enacted during the Great Depression. It protected bank depositors from the additional risks associated with security transactions. The Act was dismantled in 1999. Consequently, the distinction between commercial banks and brokerage firms has blurred; many banks own brokerage firms and provide investment services.
What is different now is that the core checks and balances we have long relied on to constrain excessive risk taking and protect the integrity of our markets--which are as essential to capitalism as money--have been systematically dismantled over the last generation.
This is where our complicity comes in. More than just buying houses we could not afford, average Americans bought into a mythology--one that the political-financial complex peddled--that held all regulation equally evil and an impediment to economic growth. This was, of course, a perversion of capitalism, not a promotion of it, led by a coalition of self-interested, rent-seeking businesses and their free market-idolizing enablers in Washington. But we as a people failed to see the difference and were glad to live inside the blinding bubble we helped blow out of proportion.
Now that bubble has burst, we are starting to appreciate just how warped and unbalanced our system has become and the costs of that to us all. Indeed, forget about the AIG bonuses for a moment and consider what happened before it crashed and burned us. How did our government let one insurance company get so big that its collapse would imperil the world financial system? Why was it allowed to sell a financial product--credit default swaps--that some financial analysts concede even they don't understand? And perhaps most important, why was it allowed to assume so much risk without carrying the reserves necessary to cover it?
The Class War
The class war ended with the advent of Richard M. Nixon and the 1970 shootings at Kent State. Since then real wages went flat, wives went to work to stay even. Labor unions declined. When that income was insufficient, families stopped saving. They borrowed against equity.
The financial community developed various Ponzi schemes to entertain the greedy.
When the over-leveraged home owners, businessmen and bankers couldn't borrow anymore, demand collapsed leading to unemployment, excess capacity and exported Depression.
Economic Human Rights
Neither Mr. Liddy nor anyone in the Obama Administration has demonstrated that kind of moral leadership, as they now scramble to respond to the public's demand that AIG employees return their bonuses.
By now the existential security of millions of people has been threatened or destroyed. No one is safe from the waves of value destruction set into motion by the banal evil of this self-centered business model and the unquestioning participants who failed to assert their own moral judgment. The urgent lesson for capitalism's heirs redounds through every headline: There is no "other"; there is only us. The damage that was supposed to be "theirs" is now shared misery on a global scale.
Since the days of Eichmann in Jerusalem, our understanding of human rights has evolved to include economic, social, and cultural rights. The Universal Declaration of Human Rights adopted by the U.N. includes "the promotion of social progress and better standards of life in larger freedom." The U.N. Commission on Human Rights has called the business community to account, stating that "transnational corporations and other business enterprises, as organs of society, are also responsible for promoting and securing the human rights set forth in the Universal Declaration of Human Rights."
The economic crisis has demonstrated that the banality of evil concealed within a widely accepted business model can put the entire world and its peoples at risk. Shouldn't those businesses be held accountable to agreed international standards of rights, obligations, and conduct? Shouldn't the individuals whose actions unleashed such devastating consequences be held accountable to these moral standards?