Sound economic fundamentals

by Michael O. Allen on September 15, 2008

(Photo: Mark Lennihan/Associated Press
A figure in the window at Lehman Brothers headquarters in New York on Monday)

You get far away enough from a disaster and you don’t remember what it was like. In our case, the Depression was so long ago that it’s hard to imagine that we are in one.

Except this has the makings of a global economic meltdown.

And all during the intervening years since the Depression, people like McCain advisor and former United Senator from the state of Texas, Republican Phil Gramm, from his perch as chairman of the Senate Committee on Banking, Housing and Urban Affairs, whittled away all of the measures put in place to prevent another one from happening.

Gramm was the author of the Gramm-Leach-Bliley Act, which did away with the Glass-Steagall law, which was put in place at the height of the Depression to limit the conflicts of interest created when commercial banks were 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. Glass-Steagall Act banned commercial banks from underwriting securities, forcing banks to choose between being a simple lender or an underwriter (brokerage).

The also established the Federal Deposit Insurance Corporation (FDIC), insuring bank deposits, and strengthened the Federal Reserve’s control over credit.

Gramm, who earlier this year complained that Americans had become a nation of whiners, was a particularly corrupt handmaiden to the banking industry. He was a lead economic advisor to John McCain, who keeps insisting the fundamentals of the American economy are strong, even as Americans lose their homes and jobs, and would have been a shoo-in for an economic cabinet position under the McCain administration.

These are dire economic times. The Depression must have felt like this. Banks are failing and Americans are losing their homes, their jobs and ways of life are falling by the wayside.

And, talk about being out of touch. Here’s McCain this morning talking about the catastrophe:

Our national leaders, meanwhile, are at sea about what to do. They keep rewarding the people who got the nation into this mess  with tax cuts and bailouts.

As our economy craters, shouldn’t we, to borrow a phrase from Harry Truman, attack these citadels of special privilege and greed, and drive the money changers from the temple?

Instead of bailing out Wall Street, should we be bailing out America’s Main Streets?

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