Financial hostage crisis continues

Stuart Weiss, Las Vegas

Wednesday, Sept. 19, 2012 | 2 a.m.

The political season is peaking, and each political party blames the other for our economic problems. However, neither of the parties is truly responsible — other factors are more important.

First came the Republican 1999 Gramm, Leach, Bliley Act that ended the severance between banks and investment houses, signed by Democratic President Bill Clinton. Underlying it was an ideology that stressed self-regulation, ignoring man’s tendency to act irrationally.

Coupled with this ideology was the connection of many Democrats and Republicans to Wall Street: Robert Rubin — co-chairman of Goldman Sachs before being Treasury secretary, and chairman of Citigroup after — killed the regulation of derivatives (funny money derived from the securitization of mortgages) in the Commodity Futures Trading Commission Act of 1997.

All this was the work of men. Two women ran the agencies that could have stemmed the tide: Brooksley Born, a Democrat who chaired the CFTC; and Sheila Bair, a Republican who chaired the FDIC.

Will we ever learn that we no longer live in Adam Smith’s 18th century world of multiple, independent competitors?

How is it that nearly a century after Louis Brandeis published “Other People’s Money and How the Bankers Use it,” and long after 1920-1933, when 25,000 banks went under, that we are hostage to the lack of regulation and the revolving door between business and government that can cripple our financial and economic systems?