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Fool me once........

There is no single cause of our economic woes, but there does seem to be a pervasive theme that continues to be problematic throughout our economic history. Whether one focuses on the typical American’s credit card debt or the speculative market endeavors of the banking industry, the road inexorably leads to banking and how it ultimately affects the lives of most Americans.

Regulation of the banking industry is not a Socialist/Communist plot that is a new idea dreamed up by the current administration. Neither is regulation a historically polarizing partisan argument. Most economic historians believe that the Stock Market crash of 1929 was, in great part, caused by the speculative nature of banking practices prior to the collapse of the economy. The Glass-Steagall Act of 1933 addressed and corrected many of the root causes of that collapse.

The relatively new concept of a global economy drove the idea that Glass-Steagall was an antiquated law that would severely restrict this country’s ability to compete in a world market. Therefore, through a series of legislative changes, it was functionally rendered obsolete and made ineffective in regulating the inherent conflicts of interest found between banking and investment. (In the often repeated words of bloggers across the nation “how’s that change working for you?”)

While it seems radically unpopular to cloud any issue with facts, it is worthy of mention that as early as 1991 it was clear that the banking industry and the stock market were already severely intertwined. The United States Senate voted (74 to 19 – clearly a bi-partisan decision) to cap interest rates on credit cards at 14 percent to help stimulate consumer confidence and get the economy moving again, according to then President George Bush, Senior. After the bill passed through the Senate the Stock Market suffered significant losses. When the bill went to the House for approval, it was tabled for further study and ultimately killed because of the strong banking lobby in Washington.

Interestingly enough that failed piece of legislation prompted the banks to begin imposing additional and/or increased fees. The over-limit fees were increased, the late payment fees were radically increased and the policy of increasing interest rates for a late payment was expanded. All of these additional charges were in response to an interest rate cap which never happened.

We can all agree that 20/20 hindsight is something rarely afforded to us when we are faced with any difficult decision. But banking regulation is an area where we have a wealth of historical data that supports the notion that banks, left to their own agenda, will negatively impact middle-class Americans. How then, could average Americans reasonably debate the rights of the federal government to regulate banking? By supporting the continued deregulation of the banking industry, the average American is actually financing his own personal journey to the poor house.


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