Greg Coleridge
Sunday, May 12 / Fixing Our Monetary System
sponsored by the American Monetary Institute
Cooper Union Foundation, New York City
Permitting banking
corporations to create our nation's money supply not only increases their
financial wealth, but also their political influence over lawmakers. This has
resulted in the avoidance of criminal prosecution and regulatory controls and
the continuation, if not expansion, of too-big-to-fail protections, financial
speculation, consolidation, and the license to create our nation's money
supply.
Today just isn’t
Mother’s Day.
It’s also the one-year
anniversary of the discovery of a missing piece of the Mayan calendar -- proving
the Mayans didn't believe 2012 would be the end of the world.
The current power
and influence of banking corporations over our monetary system is for many
complicated, if not mysterious. Many believe it’s always been this way. That
it’s inevitable. That it’s "TINA" – There Is No Alternative. That to mess with
our monetary system would be the end of the financial world.
But the rules and
laws governing our monetary system are not due to physical or natural causes –
shifting of tides, gravity, Halley's comet, or the annual return of swallows to
Capistrano. Nor to mystical reasons –ouija boards, ghosts, or even “invisible
hands.”
The laws and rules
of our monetary system are conscious, deliberate, intentional, and strategic.
They are designed to consolidate and expand power – both political and economic.
There is a
symbiotic or interdependent relationship between the economic and political
power of banking corporations.
Banking
corporations need the economic resources generated from their money creation
and factional reserve lending to shape political laws and rules favorable to
them and banks need political laws and rules favorable to them to perpetuate
their license to create and distribute money and for fractional reserve
lending.
Lobbying and Campaign Contributions/Investments
“Pay to play,” “what you get is what you pay for,” and
“legalized bribery” are different ways to describe how the spoils of
government work. “The best return on assets is always a political contribution," says economist William Black. On the later
point, the trillions in dollars handed over to banking
corporations for bailouts and subsequent purchasing of smaller competitors and lack of a vigorous Congressional
investigation and indictments by the Obama administration of the banking
industry following the 2007-8 financial implosion simply affirms Senator Dick
Durbin’s observation: “And the banks -- hard to
believe in a time when we're facing a banking crisis that many of the banks
created - - are still the most powerful lobby on Capitol Hill. And they frankly
own the place.”
The FIRE (Finance, Insurance & Real Estate) sector
spends huge sums lobbying Congress and federal agencies. The sector spent (or
better term, “invested”) $4.7 billion on federal lobbying between 1998 and
2011, employing several thousands of lobbyists. This was larger than any other
sector except health, which spent just $3 million more during the 13-year
period. Political campaign “investments” to federal candidates since 1990 from
the FIRE sector total $2.8 billion.
What did all this
lobbying and contributions/investments buy over the last two decades? The money
industry’s leveraged buyout of our political system resulted in passage of
certain laws and blockage of others – all of which contributed to the 2008 Wall
Street crash and global economic recession.
These included:
Passage of the Financial Services
Modernization Act in 1999 which repealed the 1933 Glass-Steagall Act
prohibiting commercial banks from providing investment banking and insurance
services.
Rejection of regulation of
financial derivatives advocated by the federal Commodity Futures Trading Commission (CFTC) and its head Brookley Born.
Blockage of a law
forcing banks to disclose money-losing or “toxic” assets to their investors.
Passage of the Commodities Futures Modernization Act (CFMA) in 2000 which exempted financial derivatives, including credit default swaps, from any regulation.
Enactment of a
rule by the Securities and Exchange Commission permitting investment banks to
set their own debt to capital ratio. It had been no more than 12:1. Afterwards,
some banks went as high as 40:1.
Failure to prevent
predatory lending.
Federal preemption
of state consumer protection laws.
Making it easier
for banks to purchase, bundle and sell subprime loans without fear of liability.
Forcing Fannie
Mae and Freddie Mac to divert from purchase prime housing loans to risky
subprime loans from financial institutions.
Massive
mergers and concentration in the financial sector.
Passage of the Credit Rating Agencies Reform Act of
2006 reducing the ability of the SEC to oversee credit rating agencies that
were giving high marks to financial entities engaged in risky investments.
Bank bailouts in the trillions.
And, of course, continuing to permit banking
corporations to create and circulate money rather than We the People as
authorized in the Constitution – freely without a revolution or coup.
Banks and other financial institutions, which caused the 2008 financial and housing crisis, were first in line to receive billions in federal bailout assistance. US commercial banking corporations with political ties were more likely to receive federal bailout money under the Troubled Assets Relief Program (TARP). Among the largest recipients were Bank of America ($45 billion), Citigroup ($45 billion), JP Morgan Chase ($25 billion), and Wells Fargo ($25 billion).
Banks that spent more money on political lobbying were more
likely to receive TARP bailout funds.
Wall Street pulled
out all stops to neuter the Dodd-Frank Restoring American Financial Stability Act, the so-called financial
“reform” bill passed in 2010. What
started out as a legitimate effort to “rein in $600 trillion in derivatives,
create a giant new federal agency to protect financial consumers, open up the
books of the Federal Reserve for the first time in history and perhaps even
break up the so-called ‘Too Big to Fail’ giants on Wall Street” achieved little
permanent change as the nation’s biggest banks unleashed over 2000 paid
lobbyists and showered key Congressmen and Senators will campaign contributions/investments.
Wall Street spent $251 million on lobbying connected to the bill during the
first half of 2010.
Nineteen of the twenty-two
members of the Senate Banking Committee, which dealt with the proposal, receive
donations from Wall St in 2009. Each of those up for reelection in 2010
received at least $180,000. Former Senate Banking Committee chair Chris
Dodd received over $12 million in his career in political contributions from
the FIRE sector. Barney Frank, former Chair of the House Financial Services
Committee, raised about $1 out of every $3 over his career from the FIRE
sector. The FIRE sector invested $42 million in the Obama campaign in 2008.
John McCain raised, by comparison, $31 million. Obama received far less than
Mitt Romney in 2012, but the FIRE nevertheless hedged their bets.
Sen. Sherrod Brown co-authored the Brown-Kauffman amendment that
would have broken up the big banks, but failed to pass during Dodd-Frank. Bank lobbyists
killed the bill. The FIRE industry spent $658 million in political investments
in 2011-12 – far and away the largest amount of any interest group sector.
Brown is currently working with Senator David Vitter (R-La.) on a new bill to help combat the Too Big To
Fail banks. Public education and organizing is the only chance it has for
passage given the avalanche of political campaign investments.
Political lobbying
is particularly effective for the banking and other sectors during the rule
making process following passage of any legislation for several reasons. The
public, for one, is usually not actively engaged lobbying for their interests,
as most citizens believe nothing more can be done once a bill is passed. For
another, lobbyists engage with bureaucrats or congressional staffers instead of
elected officials at this stage in closed door meetings – bureaucrats and
staffers who are often enticed with employment as a lobbyist, consultant or
strategist if they play ball. Bank funds are used to hire former government
employees.
The money
industry’s political investments also bought freedom for those responsible for
the financial and housing crisis. Despite evidence of fraud at the major banks,
no major bank executive has gone to jail. "If you go back to the savings
and loan debacle, we got more than a thousand felony convictions of the elite...”
according to William Black who was deputy director of the National Commission
on Financial Institution Reform, Recovery and Enforcement. No one of note has been indicted for the 2008
financial implosion.
So what do we do? How to we “fix” (as in repair) this “fixed” (as in
rigged) system?
We educate and
organize…strategically.
Since “corporations are
persons” and “money is speech” in our current constitutional system, banking
corporations (like all corporations) can use their corporate revenue exercising
their political “free speech” on behalf of and in opposition to issues, ballot
measures and political candidates. The combination of these constitutional
“rights” and virtually unlimited corporate resources thanks to money creation
and fractional reserve banking means the political voices of banking
corporations drown out the political voices of people who aren’t corporate CEOs
or otherwise personally wealthy. This profoundly threatens what remains of our
democracy.
The solution, thus, must be two
tracks: real monetary reform AND real political reform. Democratizing our money
system… along with ending corporate personhood and money as speech as called
for by the We the People Amendment to the U.S. Constitution.
It’s symbiotic.
Interdependent.
There is no missing piece like
the Mayan calendar of the social change puzzle. The overall blueprint is clear.
We must acquire, refine and apply
organizing skills to create institutions, campaigns, coalitions and movements.
But also required from us are
smarts, commitment, dedication, organizing and love of people and justice…a
love almost as much as we love our Mothers.
