Richard Bowen

  • Home
  • About
  • Speaking
  • Videos
  • Media/Press
  • Testimonials
  • Blog
  • Contact
  • +1-214-604-5492

June 18, 2015 By Richard Bowen

History Repeats Itself… Congress Tries to Reinstate Controls on the TBTF Banks

Ethical leadership speaker Richard Bowen supports banking reform.
Robert Reich says that Glass-Steagall should be a key Presidential candidacy criterion. Source: Policy Network (Wikimedia).

In May, Robert Reich, former Labor Secretary, listed restoration of Glass-Stegall as a key Presidential candidacy criterion. Reich was in Iowa for the Raising Wages/Working Families Summit – the first of a national series – where he was the featured speaker.

The reinstatement of Glass–Steagall is steadily gathering public support. A bipartisan group of senators and congressman are proposing the “21st Century Glass-Steagall Act” in an effort to curb the power of big banks by reinstating a Depression-era rule that separated commercial and investment banking. Some believe that Glass-Steagall is the essential first step in dealing with the crises in employment, wages, and living standards in the United States.

Enacted during the Great Depression, the Glass-Steagall Act prevented commercial deposit banks, which are insured by taxpayer money through the Federal Deposit Insurance Corp (FDIC), from engaging in insurance and risky investment activities.

The 1999 repeal of Glass-Steagall, which permitted the merger resulting in Citigroup, allowed banks to expand rapidly in size, to the point where the top 0.2 percent of banks controlled nearly 70 percent of all banking assets. The 2008 financial crisis didn’t stop the  biggest banks from continuing to grow even though lawmakers from both political sides  have criticized these banks as being too big to fail (TBTF), and too big for jail and prosecution.

The new bill, known as H.R. 381 – The Return to Prudent Banking Act of 2015 sponsored by Marcy Kaptor (D-OH),  would reinstate and update the separation between commercial and investment banking, giving financial conglomerates a five-year transitional period to split up their businesses in order to come into adherence with the absolute firewall.

However to take it a step further, the bill is more than a mere a reinstatement of the original 1933 Glass-Steagall Act. It would also bar commercial banks from some of the newer, more complex practices that they became infamous for in the wake of the recession, including trading complex derivatives and swaps or engaging in hedge fund and private equity activities. The new bill also seeks to close loopholes created by regulators’ interpretation of the original bill in the 1980s and 90s, preceding its repeal.

Support for restoring the banking firewall has come from various corners since the 2008 financial crisis. Nobel Prize-winning economist Joseph Stieglitz argued at the height of the recession, that the repeal created a “high-risk gambling mentality.”

Ethical Leadership Speaker Richard Bowen
John McCain (R-AZ) supports banking reform. Photo source: Jim Greenhill (Wikimedia).

Senator John McCain (R-AZ), said, “If enacted, the 21st Century Glass-Steagall Act would not end Too-Big-to-Fail. But, it would rebuild the wall between commercial and investment banking that was in place for over 60 years, restore confidence in the system, and reduce risk for the American taxpayer.” McCain voted for the bill that repealed Glass-Steagall in 1999 and one of its primary authors was a close economic advisor to his 2008 presidential campaign. Restoring Glass-Steagall has also historically not enjoyed White House support.

Senator Elizabeth Warren (D-MA) says, “I’ll be out there fighting, and here will be the fun part…I’ll be fighting right next to John McCain.” She believes this bill will succeed where others failed because a bipartisan group of senators are finally willing to fight for it publicly. 

There are now 54 sponsors of the legislation, which aims “To repeal certain provisions of the Gramm-Leach-Bliley Act and revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so-called ‘Glass-Steagall Act,’ and for other purposes. The Lyndon LaRouche Political Action Committee’s campaign for reinstating Glass-Steagall, which went into high gear in October 2008, continues to expand as well.

LaRouche, along with many others, believe that the reestablishment of Glass-Steagall is critical to save the U.S. economy. Ironically, two former chairmen of Citigroup, Richard Parsons and Sanford Weill — who once had a portrait of himself in his office called “The Shatterer of Glass-Steagall” — have endorsed restoring the firewall. Citigroup, which was bailed out in 2008, was the first big beneficiary of the firewall’s repeal.

Looks as if the TBTF Wall Street banks are getting the message. Earlier this month, Wall Street bankers had a war council session in New York. Press leaks have reported on their campaign of threats to cut off campaign funds to Congressmen who join the drive for Glass-Steagall. As the momentum in support for this bill shows, that pressure may very well backfire.

Here’s a bit of colorful background on Glass-Steagall…

In 1933, Ferdinand Pecora held the first of many Senate hearings investigating the causes of the 1929 stock market crash and resulting Great Depression. “Pecora was appointed chief counsel to the U.S. Senate’s Committee on Banking and Currency. Assigned to probe the causes of the 1929 crash, he led what became known as the “Pecora commission,” making front-page news when he called Charles Mitchell, the head of the largest bank in America, National City Bank (now Citibank), as his first witness.

In the hard questioning of Mitchell, Pecora revealed, in addition to other abuses, “…that National City had hidden bad loans by packaging them into securities and pawning them off to unwitting investors.”

Through the hearings, the American public became outraged to learn that these and other abuses were widespread among the large banks and were major contributing factors causing the Great Depression. Laws were passed to ensure that this would never happen again, including the passage of Glass-Steagall later that year, which prohibited the banks from both making loans and selling securities.

Beginning with Bush II and Clinton, there was a big push by the large banks, to deregulate, which included the repeal of Glass-Steagall. The argument was made that the banks could effectively self-regulate and avoid conflicts of interest by forming strong, but separate, credit and investment functions.

However, an autopsy of the recent financial crisis shows that just as in the Great Depression, the banks succumbed to weak underwriting hiding and profiting from those “… bad loans by packaging them into securities and pawning them off to unwitting investors.”

Unlike the early 30’s, we do not have a Pecora Commission to educate the public about the blatant abuses again occurring which have caused the financial crisis, with the largest banks becoming ever more powerful and wrenching control from government and writing legislation and regulations favorable to them. The dangerous and reckless elements in our financial sector have become so powerful they could lead us to the brink of another more severe financial meltdown.

History does repeat. And reinstating Glass-Steagall is a step in the right direction.

[tweetthis url=”http://bit.ly/1ImvZgZ”]Reinstating #GlassSteagall is a step in the right direction. ~ @RichardMBowen #tbtf #hr381 #BankReform[/tweetthis]

Toward Accountability… Maybe Just a Small Step
The D.O.J gets ready for the next round….lets see if the banks get away...again!

Tagged With: Banking reform, BankReform, Elizabeth Warren, FDIC, Glass-Steagall, John McCain, Robert Reich, tbtf, Too Big to Fail, Wall Street Banks

Ethics on your mind? Subscribe to my ezine to get my latest article delivered right to your inbox. Click Here to Subscribe

Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

Related Posts

  • The Large Bank Stranglehold is Tightened!The Large Bank Stranglehold is Tightened!
  • Too big to be held accountable?Too big to be held accountable?
  • The Whistleblower Newsroom; Is This a Conspiracy?The Whistleblower Newsroom; Is This a Conspiracy?
  • So it’s about bank mergers, stupid!So it’s about bank mergers, stupid!

What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59-05:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
https://richardmbowen.com/testimonials/2556/

Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19-06:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
https://richardmbowen.com/testimonials/711/

Ben Stein"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26-06:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
https://richardmbowen.com/testimonials/712/

Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17-06:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06-06:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50-06:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22-06:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

Want to Hire Richard?

Watch Richard

See What Clients are Saying

About Richard

Recent Posts

  • Reflections of a Whistleblower – The Boom and Bust Cycles
  • What should you do before you report wrongdoing?
  • Peace and happiness this holiday season
  • Wishing you a warm and happy Thanksgiving
  • Speaking at the University of North Texas

Categories

  • Business Ethics
  • Congress
  • Corporate Debt
  • Corruption
  • Ethical Leadership
  • Financial Crime
  • Financial Crisis
  • Financial Crisis of 2008
  • Fraud
  • Holiday
  • International
  • Mortgage Lending
  • Mortgage Meltdown
  • Relationships
  • Resources
  • Speaking
  • Texas Politics
  • The Fed
  • Too Big To Fail
  • Uncategorized
  • Updates
  • Wall Street
  • Whistle Blowers

About Richard

Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

Read more

Connect with Richard

  Facebook   Twitter   Linked   YouTube

Contact Us

Phone: +1-214-604-5492

Email: Richard@RichardMBowen.com

Contact Richard

Copyright 2021© 2023 · Richard M. Bowen | ALL RIGHTS RESERVED.

X
Sign up to receive my blog posts via email!
Subscribe >>