A common theme in many horror movies and television shows (and other genres as well) is the "surprise" twist in the plot in which what you thought was the horrible monster or terrible danger turns out to be what is protecting you from the real horrible monster or terrible danger . . . which usually turns out to be you. This is supposed to help us understand just how depraved and hopeless humanity really is, we're the real monsters, and it's our intolerance, bigotry, stupidity, and all the other things that make us the most vile blot on what would otherwise be a perfect country, world, universe, creation, or whatever, that is causing all the problems.
Of course, like all exaggerations, there is a grain of truth in the cliché. Otherwise, there would be no connection between the viewer and the show — an essential element if entertainment is to, well, entertain. It's all very well to beat your audience over the head with your version of Hollywood Morality (the only real kind . . . according to Hollywood), but if there's no connection with the audience, it's going to remain something that the Great Unwashed just won't understand, no matter how hard you hit them over the head or try to instill feelings of guilt for not buying into your vision.
Be that as it may, we do have a genuine horror story along those lines today. A two-headed beast that, portrayed as a demon monster, turned out to be the Defender of the Human Race . . . or (at least) the financial system.
Obviously, we're talking about the "Glass-Steagall Beast." According to conservatives (and that label doesn't really mean anything these days, but it's handy as a label and to prevent real thought), the second Glass-Steagall (Your first plot twist — there were two acts known as "Glass-Steagall." Nobody remembers the first one.) was a foul creature of the New Deal.
This fiend prevented the financial services industry in the United States from joining forces to compete effectively with the monolithic and powerful European financial services industry that resulted from the introduction of the Euro, and was all set to crush America's financial strength beneath its jackbooted heel . . . unless Glass-Steagall was repealed so that America's financial services industry could afford a couple of pairs of jackboots.
Of course, earlier Glass-Steagall had been partly conquered. The resulting savings and loan debacle had nothing to do with the partial repeal of Glass-Steagall. No way. Absolutely not. It was just a coincidence that the savings and loan industry screwed up by investing in commercial real estate when their competence was in residential real estate.
It is also just a complete coincidence that the formerly separated functions that previously characterized the U.S. financial services industry — commercial banking from investment banking, and insurance from all types of banking — was followed first by immense profits . . . and then by a financial meltdown, just like Europe. It is just a coincidence that had the financial services industry maintained its own internal controls it would have avoided the whole rubber stamp mortgage scenario, aggregation of mortgage-backed securities, money creation for stock market speculation, and massive government bailouts.
Just a coincidence.
Not.
The real story? It was Glass-Steagall that protected the United States from "inter-function collusion" in the financial services industry, to coin a term. The current financial and economic crisis wasn't just a coincidence. The profits for making risky loans for questionable purposes that were guaranteed by the government were immense. The government guarantee added that there could not be a downside, a case of "heads they win, tails we lose."
The increasing flood of government regulations is a foredoomed attempt to try and force people to do what is directly contrary to what the system tells them is in their own best interest. Glass-Steagall made collusion a crime. Its repeal made it a judgment call as to whether the now-legal collusion was really the cause of the disaster, whether it was intended, whether . . . you name it. The bottom line here is that the final repeal of Glass-Steagall changed a matter of objective, verifiable fact into an opinion.
You can prove or disprove a fact. You can't disprove an opinion. And the opinion that remains is just how much the financial services industry can get away with before it either brings about its own destruction, or the State steps in to make matters worse by trying to run the economy.
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THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.
