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.
– 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.