From:  HOW WE GOT SWINDLED BY WALL STREET GODFATHERS, GREED & FINANCIAL DARWINISM ~ The 30-Year War Against the American Dream.

Chapter 5 – The Deregulation of Greed and Devaluation of Ethics – Trojan Mega Banks Abandon Reason and Prudence for Fees and Swine Bonuses

 “Banks are not chartered to be on a Zen path or journey of discovery which may retrospectively provide a destination based on the quality of the trip. Zen holds that the trip is more important than the destination The quality of the trip is important for individuals searching for truths, however if a bank lives only in the moment – ―by making hay while the sun shines‖ the quality of the trip will be temporary. And for too many years the journey of our banks was to search for executive compensation with little or no thought that the quality of a banking path should be to maintain stability.

So banks have lived in the moment of the bonus as the shadow of the Glass-Steagall Act was lifted and unraveled beginning with the Depository Institution‘s Deregulation and Monetary Control Act of 1980. So the rebirth of free enterprise and bigness for banks began under the reign of Reagan aided and abetted by lots of Democrats. Two critical features of this pivotal act allowed banks to merge as well as charge any interest rate they choose.

In 1982, the Garn-St. Germain Depository Act continued the war against regulations to curb greed. Savings and Loans were freed from any constraints to participate in their inherent Greed and outright stupidity. This legislation was sponsored by Republican Senator Jake Garn of Utah, and co-sponsored be three Democrats including Charles Schumer and Steny Hoyer! This act allowed only one shareholder to own a bank. So one fraudulent uber greedy individual like Keating in Arizona could use his own S&L to culture wealth by any fraudulent means necessary. Keating went to jail. Further Garn allowed commercial lending and adjustable rate mortgages so by the mid 80s commercial real estate was grotesquely overbuilt, oversupplied and S&Ls, originally intended to make loans only for homes, were either dead or on their way to a painful demise.  Painful for our economy and society.

Glass-Steagall was enacted in 1933, in the wake of the Great Depression, in order to prevent overly large commercial banks being involved with stock market investment. It was clear that huge banks had taken huge risks with depositors ‘assets as well as with their own by buying new issues, lending money to companies whose stock they invested in, and encouraging their customers to invest in their investments. The consensus then was that banking activities were the fundamental cause of the depression due to bankers‘ unbridled, greedy appetite for the vast rewards to be had from egregiously leveraged, highly speculative risky investments. Banks were allocated one year to decide whether they wanted to specialize in commercial banking or investment banking, because Glass-Steagall set up a regulatory fire-wall between the two types of activities. This was primarily designed to preserve banking assets in the event risk underwriting failed. And it seems that risk underwriting then, like today, was done essentially to justify participation in selling anything – no matter how much leverage – to generate fees.

By 1999 all was forgotten and all the lobbying to allow all financial entities to get into each other’s business (pants) resulted in huge profits for Wall Street and Banks, profits which were not properly added to surplus for stability but paid out as bonuses. All the CEO and executive officers became Bull Market geniuses in the race to pile individual incomes, fees and bonuses higher than Mt Everest.

The Gramm-Leach-Bliley Act of 1999 repealed: the Banking Act of 1933 known as Glass-Steagall; and the Bank Holding Company Act of 1956, which prevented bank holding companies headquartered in one state from acquiring a bank in another state and from engaging in the insurance business – further, the approval of Federal Reserve Board was required under this act to establish a bank holding company. Graham-Leach-Bliley, once again, allowed Mega, Trojan-like Banks to come alive, like dinosaurs rising from the dead to gobble up our economy as they did in 1929.

On December 21, 2000 the Commodity Futures Modernization Act was signed into law by President Bill Clinton as it was attached to an 11,000 page omnibus appropriation bill. This bill was drafted by lobbyists and Wall Street lawyers for Phil Gramm (PhD) Chairman of the Senate Finance Committee, who specifically wanted a deregulated atmosphere for over-the-counter energy trades and trading on electronic energy commodity markets. Further, it willfully and intentionally (two characteristics of fraud) created the Credit Default Swap to get around state regulators who regulate insurance, because this was insurance called a Swap. Which was not regulated – and really a bet that nothing ―insured would ever go down. This bill was introduced in the Senate on December 15, 2000, the last day before Christmas recess by three Republican Senators led by Gramm and joined by two Democrats.

It is probable that only Gramm, and his lawyers who drafted the bill, read the dire terms of the bill which was referenced and buried in a long and complex conference report to the 11,000 page ―2000 omnibus budget bill. However after it was passed there was enough time to have read the bill before it led to the surreptitious, unregulated behavior of Enron which caused its collapse, not so long after.

The Democrats did introduce legislation to close the so-called ―Enron Loophole‖ after the fact, which Republicans killed. But the Democrats were not loud enough in their condemnation of the Enron Loophole and not focused on the most alarming consequences of worthless Swaps being used to insure the geometric leverage of pooled subprime loans banks made as fast as they could flip the paper and sell the ―insured‖ derivatives.

By the end of 1999 everything was in place for Bankers, led by Citi Group and Wall Street Godfathers to become innovative enough to do whatever they could dream up to build personal wealth. The CEOs did not have to call in the National Guard to shoot naysayers – unbridled, unfettered greed was once again unleashed on humanity.

Andrew Carnegie rolled over in his grave in glee knowing he was right to have taken advantage of his workers, because his Social Darwinism was still alive and vibrant in the less obvious format of Financial Darwinism. …”