Wall Street Gamblers Readying To Steal from Workers Again, With Help from Congress

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January 2015 - We all remember all too well the terrible harm done to working men and women across America in the last decade by a great recession caused by a frenzy of deregulation of safeguards brought about by a Republican President and a Republican Congress at the bidding of banks, mortgage and insurance companies.

Unbelievably, the Republicans in Congress are at it again, and this time around they have some cohorts from the Democratic side, including President Obama. In mid-December, the House and Senate both passed a federal spending bill to fund the government through the coming year. Bipartisan majorities in both houses voted for it. But that’s not all they did.

Republicans added an amendment to repeal regulations enacted in 2010, after the last recession, designed to rein in the Wall Street gamblers by specifying that taxpayers will not bail them out, as before, should their schemes collapse. Those regulations, called Dodd-Frank, lessened risk by putting limits on the types of risky investments that could be insured with government dollars.

Large numbers of Democrats cried foul and refused to support the repeal, but Republicans wouldn’t vote for a spending bill that didn’t include that new deregulation. So many Democrats, who desperately wanted a funding bill, agreed to that outrageous demand. Even President Obama, whose policies helped pull our nation out of that last recession, was lobbying Congress for votes in favor of returning to the policies that led to it, in order to get a spending bill passed. He called it a “compromise.” Some other Republicans who were hoping for a government shutdown also voted against it. But the coalition of business anti-regulation Republicans, and Democrats fearful of losing any funding bill, prevailed.  The taxpayer-protection, anti-gambling, insider-trading, collusion regulations of 2010 were repealed.

How can this be happening again? Don’t those Republicans and Democrats remember what happened just a few years ago, after President George W. Bush and the Republican-controlled Congress removed the safeguards and firewalls established under the New Deal of the 1930s to protect hard-working everyday Americans in response to the economic collapse of the Great Depression, caused by the recklessness and collusion of unregulated financial institutions? 

Here are the terrible results of the recent great recession according to various news reports: More than 8 million working Americans lost their jobs, 9 million people lost access to health care, and 3 million American families’ homes were foreclosed upon. Workers’ life savings disappeared, and average income levels dropped substantially. The nation itself teetered on the brink of economic collapse, all caused by the removal of laws that had overseen financial institutions, who in the absence of these laws promised they would behave.

As New York Times columnist Paul Krugman, a Nobel Prize winner in economics, explained, financial institutions have no motivation to behave responsibly if they are assured of a taxpayer bailout should they fail. “If banks are free to gamble, they can play a game of heads we win, tails the taxpayers lose.” That’s what happened in the 1980s Savings and Loan failure, and again in the 2008 crash and recession, he noted.

That makes Congress’ action “outrageous,” Krugman rightly noted. “After all, even if you believe (in defiance of the lessons of history) that financial institutions can be trusted to police themselves … you should be against letting Wall Street play games with government-guaranteed funds,” he added.

In fact, he reported, Citigroup, which has generously financed Republican Congressional candidates, wrote the very language of the repeal the Republicans got enacted. “So the people who brought the economy to its knees are seeking the chance to do it all over again. And they have powerful allies, who are doing all they can to make Wall Street’s dream come true.”

The Spanish philosopher Santayana is widely quoted as saying, “Those who do not learn from history are condemned to repeat it.” Well, history has taught us, again and again, that a reckless, unregulated financial industry will inevitably bring great harm to regular working families, many of whom never recover in their lifetimes.

Have the members of Congress who voted for deregulation not learned anything from history, or do they just not care about the American working people who are always forced to pick up the tab?

 

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