Them

For most of their history, U.S. banks (commercial and investment banks), have been the major source of capital to grow and run American industry. Whether it is leveraged debt (using the equity on your balance sheet to borrow general debt), borrowing against receivables or down and dirty equity, American industry has been built on the back of these financial structures and the institutions that supply that capital. But there has always been a separation of “church and state” between those seeking the capital and those providing it. In some ways, this dichotomy between these forces – this rather clear separation of interests – had always served to provide a system of checks and balances: on the financial world as to their ability to judge and manage their financial investments, an on industry and their ability to justify and retain capital infusions.

Well, since the Clinton administration’s 1999 repeal of those sections of the Glass Steagall that separated commercial banking from a trading component, America has accelerated a trend in generating profits from “doing stuff” to “buying and selling stuff.” It’s no longer about the long haul; American companies are all about the quick buck which can only realized by speculative trading.

And speculative trading means taking positions in assets to be able to trade them. “Wall Street had spent much of [the late 1990s] arguing that America's banks needed to become bigger and badder, in order to compete globally with the German and Japanese-style financial giants, which were supposedly about to swallow up all the world's banking business. So through legislative lackeys like red-faced Republican deregulatory enthusiast Phil Gramm, bank lobbyists were pushing a new law designed to wipe out 60-plus years of bedrock financial regulation.” Rolling Stone Magazine, February 12^th. Congress and President Bill Clinton bought into this reckless mythology.

Indeed, Rolling Stone Magazine has been tracking this transition for some time. In their February 12^th analysis the title of their seminal article tells you where they stand: The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet: Banks are no longer just financing heavy industry. They are actually buying it up and inventing bigger, bolder and scarier scams than ever.

The ability of banks to push for change and efficiency in their capital seekers becomes seriously compromised as the lines of ownership blur. The powerful financial lobby now can deploy its Congressional and regional legislative reach, adding the press of the Super PAC funding capacity, to their industrial assets as well. Pollution and safety regulation? Stopping market manipulation? Why, they don’t increase profits? The church has become the state. In fact, these large fully integrated financial institutions are prone to lend themselves very cheap money (supplied by the Federal Reserve at marginal interest rates to federally insured banks), which they do not play out to mid-level and smaller business borrowers who need the money, in order to buy the companies and assets they used to finance for third party borrowers. The rich get richer, and the fed is shoveling cheap capital at them.

“Fifteen years [after the repeal of Glass Steagall], in fact, it now looks like Wall Street and its lawyers took the term to be a synonym for ruthless campaigns of world domination. ‘Nobody knew the reach it would have into the real economy,’ says Ohio Sen. Sherrod Brown. Now a leading voice on the Hill against the hidden provisions, Brown actually voted for Gramm-Leach-Bliley as a congressman, along with all but 72 other House members. ‘I bet even some of the people who were the bill's advocates had no idea.’

“Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals. They likewise can now be found exerting direct control over the supply of a whole galaxy of raw materials crucial to world industry and to society in general, including everything from food products to metals like zinc, copper, tin, nickel and, most infamously thanks to a recent high-profile scandal, aluminum. And they're doing it not just here but abroad as well: In Denmark, thousands took to the streets in protest in recent weeks, vampire-squid banners in hand, when news came out that Goldman Sachs was about to buy a 19 percent stake in Dong Energy, a national electric provider. The furor inspired mass resignations of ministers from the government's ruling coalition, as the Danish public wondered how an American investment bank could possibly hold so much influence over the state energy grid…

“But banks aren't just buying stuff, they're buying whole industrial processes. They're buying oil that's still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home. Then, just for kicks, they're also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc.

“Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation. It's something akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays.” Rolling Stone.

As the European Union is seriously considering reimposing the separation between trading and lending institutions, America voters are not even marginally interested in correcting this anomaly. Is it that our failed educational policies, resulting in plunging performance metrics, have rendered zombie-level awareness of serious economic issues the American voters’ norm? Our middle class is contracting, 60% of the lowest economic segments of America own 2.3% of her wealth while the top 1% owns 42% and average American buying power has dropped, year-after-year, for well over a decade. Are these side effects from such financial vectors so obscure that voters cannot see them or has the new Citizens United decision unleashed an exceptionally well-financed Super PAC misinformational propaganda effort that has convinced the electorate that these financial machinations are good for America?

We seem to be killing the future standard of living for the vast majority of Americans for generations to come. Lying and manipulation seem to have killed social mobility, turning the land of opportunity into the land of opportunists. Bull appears to be an appropriate symbol for the lovely Wall Street that taxpayers bailed out to stabilize the economy.

I’m Peter Dekom, and while I can write about these trends, unless there is a groundswell of anger at the process, things are only going to get a whole lot worse.