Stop This Madness!

| May 10, 2010 | 0 Comments

A while back I wrote an article on the corporate greed and corruption on Wall Street.  I also talked about the Glass-Steagall Act of 1933.

Glass-Steagall was a great law providing for the separation of commercial and investment banking.  In a nutshell, the act prevented commercial and retail banks from making bets in the securities markets.

But in 1999 Congress repealed the law.  Former President Bill Clinton signed on the dotted line.  The repeal of the act allowed commercial banks to (once again) make speculative bets in the markets.

Wow, what a shocker….

A mere 9 years after the repeal of this act the banking system melted down.

The height of the credit crisis was in late 2008.  Some of the same banks demanding the repeal of Glass-Steagall came to Congress with hat in hand.

They said they were “too big to fail”.  These banks needed $700 billion from Congress to bail them out.  Yep, the good ole’ U.S. taxpayer was forced to pony up.

Why did the banks do such a thing?

They said there would be an economic depression.  There would be a run on the banks.  The financial system would crack like a dropped egg if they weren’t bailed out.

How did they get themselves in this position?

Fraud, that’s how!

A bankruptcy examiner’s report for the collapse of Lehman Brothers was recently released.  The examiner found Lehman was engaging in accounting fraud.  The same type of fraud leading to the collapse of Enron in 2001.

Lehman was carrying $50 billion of toxic assets off its balance sheet.  In essence, it was hiding the really bad stuff from public view.  All in an effort to keep investors happy.  By painting themselves in a rosy light they avoided scrutiny.

But eventually, the fraud caught up to Lehman.  They couldn’t hide it anymore.  Lehman was going bankrupt.

Only this time, an institution the size of Lehman collapsing brought the economy to its knees.

The collapse of Lehman sent shudders through the financial system. Lehman held over $600 billion in debt.  The systemic risk of a bank this size collapsing was immense.

So where am I going with this?

It’s time for America to demand accountability for those engaging in fraud on Wall Street.  Nobody has taken responsibility for what happened to Lehman.  The financial crisis Lehman helped create is causing untold hardship for America.

Millions of Americans are in dire straits due to collapsing home values and unemployment.  Yes, Americans are paying dearly for the fraudulent actions of bank executives.

But not one banker has been put behind bars due to the obvious fraud they perpetrated.

Some lawmakers are starting to take notice (finally).  Delaware Senator Ted Kaufman is filing an amendment to the upcoming Wall Street reform bill.

The amendment promotes criminal prosecution of executives who engage in financial fraud.  The amendment allows for regulators, investigators, and prosecutors to coordinate in rooting out fraud.

This amendment is a step in the right direction.  Americans deserve to see these crooks held responsible for what they’ve done.

Here’s what you can do…

Contact your Senators and tell them to support the Wall Street Reform bill.  Tell them you want Wall Street held accountable for their actions.

Tell them to push for the reinstatement of the Glass-Steagall act as well.

This important act kept the banking system safe for over 60 years. Commercial and retail banks made money by lending to businesses and consumers.  Investment banks made money by raising capital for corporations and governments by issuing stocks, bonds, and other securities.

By repealing the act, the distinction between commercial and investment banks was wiped away.  It was no coincidence the “you-know-what hit the fan” a short time after Glass-Steagall was repealed.

Tags: , , , ,

Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

Leave a Reply

Your email address will not be published. Required fields are marked *