Do you remember the movie called The Producers? The down-and-out director was fleecing little old women by selling them shares in his next play. Of course, he grossly oversold the number of shares and had to look for a play that was sure to fail. That way, he got to pocket the money and “comfort” the little women over their poor luck. They never knew the game was rigged – until the play turned out to be wildly successful.

I was reminded of this movie upon finding that Goldman Sachs, the most trusted and admired Wall Street investment firm, was charged with rigging the investment game against its own clients. The firm has been charged with bundling very poor investment grade debt and selling it to their clients, all the while collaborating with a hedge fund manager, with whom they jointly selected the poor investments to bundle, and with full knowledge this manager was betting the debt would go into default. The hedge fund manager made over one billion dollars in 2008 while Goldman Sachs clients took a severe beating in the financial markets.

According to the Wall Street Journal, these charges may prove to be the tip of the iceberg for many of the top investment firms on Wall Street. Most people are probably not surprised by this reckless and unethical behavior as we have come to expect our financial system to be overloaded with greed. Since the repeal of the Glass-Steagall Act in 1999, institutions that previously were prohibited from engaging in both commercial and investment banking were allowed to merge and expand into any type of financial transaction. The floodgates of financial hell were opened and it only took ten years before they brought this country to its knees.

The Democrats are trying to address the financial abuses of Wall Street and to prevent another financial collapse. After the banking collapse of 1929, Congress passed the Glass-Steagall Act in 1932 and 1933 (two different acts addressing the banking system and named after the sponsors, Carter Glass, D-VA, and Henry Steagall, D-AL) and the effect was to regulate banking. The provisions of both acts were successful until its shortsighted repeal in 1999. For what appear to be specious reasons, Republicans are opposed to the Democratic plans to re-regulate the financial industry.

The main reason Republicans say they oppose the proposed regulations is that they will lead to more taxpayer bailouts of Wall Street. They are referring to a provision that requires financial firms to pay into a $50 billion fund that would be used to wind down any too-big-to-fail firm that was collapsing, thus preventing a taxpayer bailout and protecting the financial system. The industry is being charged to bail itself out so that taxpayers no longer are forced to repeat the bailouts of 2008, a most distasteful matter. This “bailout fund” is little different from the Federal Deposit Insurance Corporation (FDIC) that was created in 1932. Banks pay into the FDIC and that money is used to handle failing banks, of which Georgia has had an abundance since 2008. The FDIC is no more a taxpayer bailout for the banks than is the proposed bailout fund for large financial institutions. I watched Mitch McConnell on a Sunday news show. McConnell started talking about “this new taxpayer bailout” in the financial reform bill but as soon as the host pointed out that the industry, not taxpayers, provided the funding, he never used the term taxpayer again but he did repeat the word bailout over ten times. You have to stay on your toes with politicians. McConnell was obviously repeating a term, bailouts, Frank Lutz believes will turn off taxpayers.

In my opinion, too many Democrats and Republicans in Congress are beholding to Wall Street. It will be a miracle if substantial re-regulation is passed but at least the Democratic plan, though weak, is stronger than the Republican plan. Republicans have decided, even on important matters like this, to continue to be the Party of No, or as Sarah Palin says, hell no. They are making a big mistake taking the side of Wall Street – and make no mistake about it, that is exactly what they are doing. Main Street plays second fiddle in the Republican Party.

For the life of me, I cannot understand the Republican worship of free markets. They speak of the wisdom of the markets and how free markets will regulate themselves, as if free markets have a mind of their own. However, men run the markets, rig the markets, defraud the markets, and pursue greed without regard to ethics or morality. We must have the markets, but we need transparency, honesty, and ethical behavior. It is a sad commentary on man that regulations are necessary to curb unbridled greed. I wish Congress would re-pass the Glass-Steagall Acts of 1932 and 1933 and be done with it. These acts worked well for over 60 years; bring them back. Let us separate commercial from investment banking for the last time.

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Jim Fitzgerald

Jim Fitzgerald

A clinically trained psychologist, Jim had a private practice in Cobb County for almost 30 years. For the last ten years he has been a Professor of Psychology at Goddard College in Plainfield, VT, but lives in the North Georgia Mountains.