Citizens Electoral Council of Australia

Printer-friendly version

Citizens Electoral Council of Australia

Media Release Monday, 8 October 2018

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432

Without Glass-Steagall we’re on a debt ‘treadmill to Armageddon’

For a decade too-big-to-fail (TBTF) banks and their ideological apologists have waged an all-out public relations offensive to con the public and politicians into believing that their structure had nothing to do with the 2008 banking crisis.

Specifically, they claim that the 1999 repeal of the Glass-Steagall Act, ending its separation of commercial deposit-taking banks used by the public, from investment banks that speculated in securities, did not lead to the chain-reaction meltdown of the global financial system triggered by the collapse of Lehman Brothers in September 2008.

This lie was smashed at a 26 September event at the USA’s National Press Club in Washington, DC, when five genuine experts engaged in a public post-mortem of the crisis to mark its 10th anniversary. In their discussion, law professor Arthur Wilmarth proved conclusively that the repeal of the Glass-Steagall separation, which turned deposits into fuel for wild speculation, was the major factor in the crash.

This event is essential viewing by anyone in the world who is concerned about their financial future: not just in the United States, but in the UK, Australia, Europe, Japan—everywhere Glass-Steagall has been debated, but the banks have used their corrupt power over politics to block any efforts to break them up again.

Click here to watch “Ten years after Lehman Brothers: 5 economic experts describe what hasn’t changed, what is worse … and how it could all happen again”.

Rewriting history

The banks have gone to greats lengths to rewrite history following the crash, to serve their agenda of keeping their claws in deposits. That’s not surprising—public relations is all about selling lies. What’s astounding is that they have been believed. In Michael Lewis’s book The Big Short: Inside the Doomsday Machine, contrarian investor Steve Eisman expressed his disgust that Wall Street got to control the policy response to the crash. “I can understand why Goldman Sachs would want to be included in the conversation about what to do about Wall Street”, he said. “What I can’t understand is why anyone would listen to them.” They did listen, and the big lie they fell for is that Glass-Steagall had nothing to do with it.

The financial media, chock full of bank apologists, was crucial to spreading this illusion. Despite its pre-crisis reporting having zero credibility, as it not only failed to see the crisis but cheered the behaviour that caused it, the US channel CNBC led the propaganda campaign to block the restoration of Glass-Steagall. Celebrity anchor Andrew Ross Sorkin, who wrote the glossed-over book and movie account of the crash which glorified the participants, Too Big To Fail, and is a co-creator of the Wall Street TV series “Billions”, has been especially strident in denying any connection between the repeal of Glass-Steagall and the crisis, but he has had to rely on patently false claims in doing so.

The banks’ version of events has influenced gullible politicians all over the world. In Australia, Liberal Party MPs have sent letters to constituents drafted by the Treasurer’s office which have claimed that “the implementation of Glass-Steagall laws would not have prevented the Global Financial Crisis and the collapse of major banks in the USA. The GFC was primarily caused by the risky lending practices and inadequate capital levels of banks in the United States.”

‘Glass-Steagall was right’

The five participants in the Washington event are genuine experts, not charlatans who are in fact complicit in the failed system, like most so-called financial experts today.

Bart Naylor and Robert Kuttner were Congressional staffers in the 1980s who witnessed the systematic deregulation of the financial system which led to the crash, and campaign for financial reform that puts “Wall Street back in its box”. Nomi Prins is a former Wall Street and City of London investment bank executive who quit in the early 2000s over her disgust at financial practices, predicting derivatives trading would cause a crash, and now campaigns for Glass-Steagall all over the world. Dr Marcus Stanley is an economist and policy director at Americans for Financial Reform who is fighting to reform the banking system before another crash. And financial law expert Arthur Wilmarth is a Professor at the George Washington University Law School.

Professor Wilmarth compared the crash of 2008 to that of 1929, and proved that Glass-Steagall was the major factor in the 2008 crash, because its repeal allowed the banks to dive into the same speculation, fuelled with customer deposits, that caused the 1929 crash before Glass-Steagall was enacted. “I think we need to look back at history, and say: Glass-Steagall was right, and we paid a big price when we got rid of it”, Professor Wilmarth concluded.

When challenged on the bankers’ argument that restoring Glass-Steagall would restrict credit—the same argument that the Morrison government is using against structural separation for Australia’s banks—Wilmarth answered: “I think over the long term Glass-Steagall would probably lead to less credit, which I think would be a good thing. Who thinks we have too little credit now, right? … Global credit [a.k.a. debt] went from US$84 trillion in 2000, to $173 trillion in 2008, to $250 trillion today, so we’re on a treadmill to Armageddon again.”

He emphasised that Glass-Steagall’s capacity for restraining credit is a virtue, not a vice. This is because Glass-Steagall restrains the reckless speculation that creates credit for the unproductive financial gambling that builds up unpayable debt, of the type that is swamping the world today; but it boosts the availability of credit for the real economy by keeping deposits separated from speculation.

For too long bankers and their political stooges have got away with pretending that TBTF “universal” banks, which are conglomerates of all kinds of financial services, are normal and necessary. They are not. They are a financial mutation that exposes deposits to the toxic chemical waste of financial speculation. Watch this video, share it widely, and join the fight to put the banks back in their box.

Click here to watch “Ten years after Lehman Brothers: 5 economic experts describe what hasn’t changed, what is worse … and how it could all happen again”.

What you can do

  • Share this video widely. Especially share Professor Wilmarth’s contribution, which you can do using this link, which is queued to when he starts speaking:

  • Share it with your federal MP, especially if you have corresponded with them on Glass-Steagall, but even if you haven’t. Forward the link or this release to their office with the message that the government claims that the repeal of Glass-Steagall had nothing to do with the crash, but this discussion proves that claim to be false.

  • Demand your MP support the Banking System Reform (Separation of Banks) Bill 2018 that Bob Katter introduced into Parliament on 25 June, so that Australia can have a Glass-Steagall banking separation which protects deposits and makes banking normal again.

Click here to order a free copy of the CEC’s new banking handbook, The Next Financial Crash is Certain! End the BoE-BIS-APRA Bankers’ Dictatorship: Time for Glass-Steagall Banking Separation and a National Bank.

Click here to join the CEC as a member.

Click here to refer others to receive regular email updates from the Citizens Electoral Council of Australia.

Follow the CEC on Facebook Follow @cecaustralia on Twitter Follow the CEC on Google+

Citizens Electoral Council © 2008
Best viewed at 1024x768.
Please provide technical feedback to
All electoral content is authorised by National Secretary, Craig Isherwood, 595 Sydney Rd, Coburg VIC 3058.