ANNOTATED REFERENCES for
Ship of State or Ship of Fools
Repealing the Glass-Steagall Act CONGRESS PASSES WIDE-RANGING BILL EASING BANK LAWS, Stephen Labaton, New York Times, Nov 5, 1999
"Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," said then-Treasury Secretary Lawrence Summers. "This historic legislation will better enable American companies to compete in the new economy."
Glass-Steagall Act (PBS Frontline Chronology)
Following the Great Crash of 1929, one of every five banks in America fails. Many people, especially politicians, see market speculation engaged in by banks during the 1920s as a cause of the crash.
In 1933, Senator Carter Glass (D-VA.) and Congressman Henry Steagall (D-Ala.) introduce the historic legislation that bears their name, seeking to limit the conflicts of interest created when commercial banks are permitted to underwrite stocks or bonds. In the early part of the century, individual investors were seriously hurt by banks whose overriding interest was promoting stocks of interest and benefit to the banks, rather than to individual investors. The new law bans commercial banks from underwriting securities, forcing banks to choose between being a simple lender or an underwriter (brokerage). The act also establishes the Federal Deposit Insurance Corporation (FDIC), insuring bank deposits, and strengthens the Federal Reserve's control over credit.
Commodity Futures Modernization Act of 2000 The Bet that Blew Up Wall Street, Steve Croft, 60 Minutes, Oct 26, 2008,
The vehicle for doing this was an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy.
It not only removed derivatives and credit default swaps from the purview of federal oversight, on page 262 of the legislation, Congress pre-empted the states from enforcing existing gambling and bucket shop laws against Wall Street.
"It makes it sound like they knew it was illegal," Kroft remarks.
"I would agree," Dinallo says. "They did know it was illegal. Or at least prosecutable."
In retrospect, giving Wall Street immunity from state gambling laws and legalizing activity that had been banned for most of the 20th century should have given lawmakers pause, but on the last day and the last vote of the lame duck 106th Congress, Wall Street got what it wanted when the Senate passed the bill unanimously.
"There was an awful lot of, 'Trust us. Leave it alone. We can do it better than government,' without any realistic understanding of the dangers involved," says Harvey Goldschmid, a Columbia University law professor and a former commissioner and general counsel of the Securities and Exchange Commission.
Geithner's no stress stress-test Calm Before and During the Storm, Jenny Anderson, New York Times, Feb 9, 2009
Credit derivatives are intended to reduce risk by spreading it out to as many parties as possible. That is generally considered desirable. Yet the size of the market, the lack of a history with such investments during financial stress and the worry that the clearing mechanism — the plumbing of the system — will function when the markets hit the skids are red flags for people in the business who know how quickly the spigot can turn off.
“The fact that the banks are stronger and risk is spread more broadly should make the system more stable,” Mr. Geithner said. “We can’t know that with certainty though. We’ll have a test of that when things next threaten to fall apart.”
Foreclosure Bill Fails Senate Tycoons Kill Mortgage Aid for Main Street, Michael Collins, American Politics Journal, May 1, 2009
May 1, 2009 – Washington, DC – The United States Senate took a swipe at the spirit of May Day in a spectacular show of callous indifference when it voted down a bill to provide limited assistance to citizens at risk for losing their homes. The final vote was 45 in favor, 51 opposed to Senator Richard Durbin's (D-IL) mortgage assistance bill. The original version of the bill covered some but not all of those requiring assistance. The final version was even more restricted. It applied to only homeowners currently in foreclosure as a result of actions prior to the start of 2009.
PNAC Additional PNAC Signatories KingGeorge.biz
Richard C. Holbrooke
Holbrooke Pakistan Visit Tensions Rise Between United States, Pakistan, Jackie Northam, NPR, Apr 29, 2009
U.S. officials say Mullen and Holbrooke's comments stem from impatience with Pakistan's efforts to crack down on the growth of the Taliban.
Still, the Atlantic Council's Nawaz says those comments — along with the other issues — did not produce a positive outcome.
"This is probably the worst-ever visit by an American team to South Asia in history. ... It was a complete disaster," he says. "And if this is how you want to win friends, I just wonder how you want to create enemies."
Pakistani reaction to citizens killed by U.S. Predator Drones Pakistan TV show discusses "increase in hatred" towards US due to drone attacks Mar 25, 2009 (BBC Monitoring via COMTEX) --
Hamid Mir begins the discussion by saying that as soon as one crisis ends in Pakistan, another crisis emerges and Pakistanis have now learned to live with these crises. Mir adds: a day after the judiciary crisis ended on 16th March, New York Times reported that America is now thinking about extending scope of Drone attacks to Baluchistan and David Kilcullen, adviser to CENTCOM Chief David Petraeus, told Washington Post on 24th March that "Pakistan can break up in next 6 months" and that "Army and Police do not listen to the government in Pakistan" and that "continuation of war on terror is in Pakistan's interest." Continuing, Mir says: yet another Drone attack has taken place in South Waziristan today. Mir adds: although America says that Drone attacks have many benefits, but "most Pakistani observers and a large majority of people believe that the so-called war on terror and Drone attacks have increased and not reduced terrorism in world." Mir says: there were 36 Drone attacks during Gen Pervez Musharraf's rule, 38 in 2008 and 9 so far this year in which about 500 people have been killed. Mir adds: America claims that many top Al-Qa'idah leaders have been killed in Drone attacks, but it has not provided any evidence of killing of Al-Qa'idah leaders. Continuing, Mir says: everybody knows that terrorism and "hatred against America" has increased in Pakistan due to the American policies. Mir says: if Drone attacks are continued, some other country will also find some excuse to carry out similar attacks on Pakistan.
U.S. "black ops" group. Newsweek quoted in Raw Story, Did Newly Announced Top Afghan General Run Cheney's Assassination Wing?, Muriel Kane, May 13, 2009
JSOC is part of what Vice President Dick Cheney was referring to when he said America would have to "work the dark side" after 9/11. To many critics, the veep's remark back in 2001 fostered his rep as the Darth Vader of the war on terror and presaged bad things to come, like the interrogation abuses at Abu Ghraib and Guantánamo Bay. But America also has its share of Jedi Knights who are fighting in what Cheney calls "the shadows." And McChrystal, an affable but tough Army Ranger, and the Delta Force and other elite teams he commands are among them. ...
Rumsfeld is especially enamored of McChrystal's "direct action" forces or so-called SMUs—Special Mission Units—whose job is to kill or capture bad guys, say Pentagon sources who would speak about Special Ops only if they were not identified. But critics say the Pentagon is short-shrifting the "hearts and minds" side of Special Operations that is critical to counterinsurgency—like training foreign armies and engaging with locals.
Gen. McCrystal Investigative reporter Seymour Hersh describes 'executive assassination ring, MinnPost.Com, Eric Black,' Mar 11, 2009
"Right now, today, there was a story in the New York Times that if you read it carefully mentioned something known as the Joint Special Operations Command -- JSOC it’s called. It is a special wing of our special operations community that is set up independently. They do not report to anybody, except in the Bush-Cheney days, they reported directly to the Cheney office. They did not report to the chairman of the joint chiefs of staff or to Mr. [Robert] Gates, the secretary of defense. They reported directly to him. ...
"Congress has no oversight of it. It’s an executive assassination ring essentially, and it’s been going on and on and on. Just today in the Times there was a story that its leaders, a three star admiral named [William H.] McRaven, ordered a stop to it because there were so many collateral deaths.
"Under President Bush’s authority, they’ve been going into countries, not talking to the ambassador or the CIA station chief, and finding people on a list and executing them and leaving. That’s been going on, in the name of all of us.
Gareth Porter | Inter Press Service May 13, 2009
As commander of the Joint Special Operations Command (JSOC) from April 2003 to August 2008, he (Gen. McCrystal) was preoccupied with pursuing high value al Qaeda targets and local and national insurgent leaders in Iraq, Afghanistan and Pakistan - mostly through targeted raids and air strikes.
$140 Billion to banks Quiet Windfall for Banks, Washington, Ppost, Amit R. Paley, Nov 10, 2008
The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.
But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.
Insolvent banks. INTERVIEW: The Lessons of the Savings-and-Loan Crisis, William Black, Associate Professor, Economics and Law, University of Missouri, Kansas City, Barrons, Jack Willoughby, Apr 13, 2009
Summarize the problem as best you can for Barron's readers.
With most of America's biggest banks insolvent, you have, in essence, a multitrillion dollar cover-up by publicly traded entities, which amounts to felony securities fraud on a massive scale.
These firms will ultimately have to be forced into receivership, the management and boards stripped of office, title, and compensation. First there needs to be a clearing of the air -- a Pecora-style fact-finding mission conducted without fear or favor. [Ferdinand Pecora was an assistant district attorney from New York who investigated Wall Street practices in the 1930s.] Then, we need to gear up to pursue criminal cases. Two years after the market collapsed, the Federal Bureau of Investigation has one-fourth of the resources that the agency used during the savings-and-loan crisis. And the current crisis is 10 times as large.