Posts tagged: Glass-Steagall Act

Paul Krugman and The Return of Depression Economics

I went to see Paul Krugman speak at the Riley Center for the Arts at Burr and Burton Academy in Manchester, Vermont Saturday night. He was there to promote the softcover release of his book, “The Return of Depression Economics and the Crisis of 2008.” Paul is one of my favorite columnists at the New York Times and I read him religiously (don’t tell Bill Maher). He is the winner of the Nobel Prize in Economics for 2008 and a Professor of Economics at Princeton University. He also has a blog called, “The Conscience of a Liberal.”

It was the first time I had been to the Riley Center for the Arts. I got there early and parked right out front. There were only a few people there when I arrived. I had purchased my tickets in advance and they were waiting for me when I arrived. The $10 price of admission was also good for $10 off the price of the book, which I thought was a pretty good deal. The cover price is $16.95. Mr. Krugman was going to sign the book after he spoke. I went into the theater to find a seat. It’s a very cozy, comfortable auditorium that holds about 250 people. They are all good seats. I sat four rows back on the center isle. I could see and hear perfectly.

Mr. Krugman was introduced by one of the owners of the Northshire Bookstore who sponsored the event. He gave an interesting talk for 45 minutes or so about the current economic crisis. At times he was funny and at times he was serous. He then invited the audience to ask questions.

One of the more interesting questions was, where are the jobs going to come from for our kids. Paul said that he wasn’t really sure but, green jobs were one possibility. Where are those green jobs anyway? I think the person who asked the question was retired. He may not realize how many people over 50 are looking for work after having been laid off from a job they held for years. In recessions that I remember, it was always assumed that even if you were laid off, you would probably get hired back by the same company when the recession was over. Nobody is assuming that now. A lot of manufacturing jobs are gone and they aren’t coming back, unless by some miracle something changes drastically.

I was listening to the different questions people were asking and trying to think of one of my own. I finally came up with a question about the Glass-Steagall Act but, by then it was too late to ask. I wanted to ask him if he thought the Glass-Steagall Act, that was enacted in 1933 during the Great Depression and repealed in 1999, should be brought back to prevent another financial crisis. It seemed to work pretty well for 70 years or so.

I’m not going to try and tell you everything he said. I don’t remember it all and I didn’t take notes. You can read his column, blog and book if you want to know what he thinks. Having said that, here is a quote from his October 2, 2009 column in the New York Times:

“But while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market — a market in which there are currently six times as many people seeking work as there are jobs on offer — will remain terrible for years to come.”

Wow. I don’t think a lot of politicians realize how bad the economy really is. There is far too little being done to create jobs in this country. The politicians  just don’t get it.

This March 28, 2009 Newsweek story about Paul is interesting. The title of the story is, “Obama’s Nobel Headache” and it refers to Paul Krugman’s Nobel Prize not President Obama’s.  Apparently Paul and I have some things in common. We are both the same age (56) and we both came home from school once with a bloody nose. The article implies that it was from a punch in the nose. Mine was too and it was well worth it. Based on the picture that goes with the article, he needs a bigger umbrella too.

After he spoke Mr. Krugman signed copies of his book. I was lucky enough to be one of the first in line. When it was my turn, there was a young man standing next to him talking to him as he was signing. I always thought that when an author was signing his book for you, that you should be able to have a quick converstation. I leaned over the table a little bit and got his attention by saying that I enjoyed his column in the New York Times and that I enjoyed his speech tonight. He looked at me and said thank you.

It was nice to get to meet someone that I read all the time and see on television. It only lasted a few seconds, but by the time I left, the young man was gone too.

As I was leaving the building, I noticed a woman next to me wearing a very interesting “peace button.” I told her that I liked it and she offered to give me one. She ended up giving me three buttons. Twice I offered to pay her for them, but she would not take any money. She said she had been making them since 2001 and giving them away. She never accepted payment. She gave me a business card and said that I should email her and explain how we met and she would send me another button. I am going to contact her today and find out the “rest of the story.”

Failed Bailout and Credit Card Interest Rates

The $700 billion bailout plan was voted down today. Apparently Republicans in the House of Representatives were angry that Nancy Pelosi scolded them. That’s pretty much what Representative John Boehner said about why so many Republicans voted against the bill. You can read a transcript of her 16 minute speech here on The NY Times website. Boehner thought that the bill would have passed if Nancy Pelosi hadn’t made her speech.  I watched the speech and I thought she was awesome. I find it hard to believe that her speech so traumatized House Republicans that they could no longer vote for the bill. What a bunch of crybabies.

The vote was Democrats 140 yes and 95 no. Republicans 65 yes, 133 no. The bill is H.R. 3997: Emergency Economic Stabilization Act of 2008. It is an amendment to a bill called Defenders of Freedom Tax Relief Act of 2007 and the title of that bill is: To amend the Internal Revenue Code of 1986 to provide earnings assistance and tax relief to members of the uniformed services, volunteer firefighters, and Peace Corps volunteers, and for other purposes. Huh? I kid you not. Where did they get that bill title? Well, this OpenCongress website tries to explain it. It’s enough to make your head spin. I’m getting dizzy.

This is the bailout that a few days ago Bush said we urgently needed with no oversight or regulation attached to it. The House is going to take off tomorrow and Wednesday for Rosh Hashanah and reconvene at noon on Thursday. I guess they like to sleep late.

I love this quote in the New York Times, “This is a huge cow patty with a piece of marshmallow stuck in the middle of it and I am not going to eat that cow patty,” said Representative Paul Broun, Republican of Georgia.” Not even with an ice cold Coke to wash it down?

I was thinking that since they were working so hard on bailing out Wall Street that maybe they could give consumers a break on credit card interest rates too. I think that 30% is a little steep. I received an offer in the mail today for a MasterCard. It says, “save BIG on Purchases and Balance Transfers.” There is a 0% percent rate for the first 15 months. After that it goes to 8.99%. I am just going to round these numbers up, OK? Let’s make that 9%. If I take a cash advance the rate goes to 24%. Yikes. The default APR is 29%. Now to the fine print. If my payment is received late, I fail to pay at least the minimum due, my payment is not honored by my bank, or I exceed my credit line, the APR on all balances may be increased to the applicable Default rate, 29%. Ouch. I bet it is more like WILL be increased instead of may be increased. It sounds like extortion to me.

There are five states with no cap on interest rates. They are Delaware, Virginia, Utah, South Dakota and New Hampshire, the “Live Free or Die” state. Can you really live free if you are paying a 30% rate on your credit card? Arizona has a cap, but it is 36%. Nice.

The federal government used to have “usury laws” that set a limit on the amount of interest that could be charged on a loan. The federal usury laws were repealed during the Great Depression. I hope we don’t have to start referring to it as the 1st Great Depression. Many states had their own usury laws. In 1978, the Supreme Court ruled that a national bank could charge the highest interest rate permitted in its home state. It didn’t matter where the customer lived. Nakedcapitalism.com has an interesting article about this called “The Pentagon as Financial Regulator.” It explains how credit card companies took advantage of this. Frontline on PBS.org has a great article about credit cards too, “Eight Things a Credit Card User Should Know.”

I think that if we capped credit card interest rates at say 12%, consumers would get some relief and credit card companies would cut down on mailing credit card offers. That would make the postal workers who have to deliver all these offers happy too.

Have you ever heard of the Glass-Steagall Act? Me either. It was enacted in the Great Depression to prevent commercial banks from underwriting stocks and bonds. Frontline on PBS.org has a shocking article about that too.  You might recognize some of the names that are mentioned in the article like Senator Phil Gramm and Robert Rubin, the Secretary of the Treasury. Glass-Steagall was watered down slowly over the years and finally repealed in 1999. The Financial Services Modernization Act of 1999 was enacted to replace Glass-Steagall. It replaced a good, common sense law with a bad one. It was enacted because hundreds of millions of dollars were spent on lobbyists to enable the merger of Citicorp and Travelers. The Secretary of the Treasury of the United States, Robert Rubin, accepted a job with the merged companies as soon as he knew Glass-Steagall was going to be repealed. It is an absolutely disgusting story and a perfect example of what is wrong with this country.

If you go to the United States Department of the Treasury website they paint a glowing picture of Rubin. It says that, “Upon Mr. Rubin’s retirement, President Clinton called him the “greatest secretary of the Treasury since Alexander Hamilton.” He didn’t retire, he went to work at Citigroup. Disgusting. This sort of thing should be illegal and it still isn’t. Why?

Here is another article about him in the New York Times. Apparently he is still at Citigroup, but he doesn’t know anything about what happened to the markets and it wasn’t his fault. He has made over $100 million since he started working at Citigroup. Not bad for a retired guy.

I’m voting for Barack Obama. You should too.

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