The Matchup: Engaged Citizens vs Greedy Bankers

On Thursday, the U.S. Senate passed a financial reform package that includes a handful of important reforms, but it won’t fundamentally change the relationship between banks and society. Wall Street still has a vice grip on our economy, and lawmakers still find it very difficult to stand up to bigwig financiers.

The real fight for our economy will involve future legislative battles with bankers. Winning those battles will require sweeping action by engaged citizens. The good news is, critical progressive mobilization is already happening. Public outcry helped fuel the fire for Senate reform. Rep. Barney Frank (D-MA), has said that the Wall Street reform bill he pushed through the House last year would have been much stronger in today’s atmosphere of outspoken economic unrest.

Focus on the Fed

So what’s good about the bill the Senate just passed? As Annie Lowrey explains for The Washington Independent, the Federal Reserve’s emergency lending programs will finally be subjected to public scrutiny.

The Fed served as the U.S. government’s chief bailout engine during the crisis. It injected trillions of dollars into the banking system without any oversight. We still don’t know who got the vast majority of that money, or what collateral the Fed accepted in return. There are all sorts of potential scandals, ranging from sweetheart deals the Fed cut with hedge funds to the trillions of dollars in loans to megabanks with no strings attached.

Of particular interest are the “Maiden Lane vehicles” — programs the Fed devised to purchase or guarantee assets from Bear Stearns and AIG. These were explicit bailouts for individual firms. We know almost nothing about the Bear Stearns bailout, and what little we do know about the AIG bailout is unsavory to say the least — big bonuses for AIG’s employees, with little or no effort to limit the impact on taxpayers.


There are still a handful of important fights as the House and Senate iron out the differences between their respective versions of the bill. As I emphasize for AlterNet, a host of major issues are still on the table, including consumer protection rules and fixing the derivatives casino. These changes could be gutted entirely or dramatically strengthened during negotiations between the House and Senate.

The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times, the Democratic leadership has been trying to both establish meaningful reforms and simultaneously maintain its campaign finance relationship with megabanks. Republicans have almost universally attempted to block any reform altogether.

Regulators will get a handful of important new tools, including the authority to shut down complex banks on the verge of collapse, the ability to monitor derivatives and a have new set of powers to protect consumers. That’s all good, but we’ll still be living with too-big-to-fail behemoth banks that engage in reckless trading and exploit consumers.

Engaging activists

That means that the real business of fixing the financial system is still to come. And, as Christopher Hayes emphasizes for The Nation, that business is not going to be accomplished without serious, organized progressive activists putting pressure on political leaders to act in the public interest, rather than the interests of the corporate class.

When the country suffered a trauma that massively discredited the establishment rulers, the Democratic Party became the establishment. And progressive groups in DC, under stern White House orders not to cause trouble (don’t show up at his door! he’s a donor! we might nominate him for something!), descended into what one organizer calls “grotesque transactionalism” . . . . If we’re going to get reform on the scale we need, bank lobbyists and members of Congress alike have to be confronted with the terrifying thought that the system from which they profit might just be run over — that 700 angry protesters might show up on their lawn.

As Hayes details, Bank of America lobbyist Gregory Baer woke up last Sunday with exactly that — 700 protesters in his front yard. That kind of pressure gets results. It took Franklin Delano Roosevelt seven years to enact his New Deal financial reforms. Earlier in the 20th Century, it took more than a decade for public opinion to align itself with the corporate crackdowns pushed by Republican President Theodore Roosevelt. It’s reasonable to expect the fight for fair finance to take more than two years, and important to fight hard for it.

The minimum reforms are already clear. Essentially, we need to bring banking back to the model that persisted from the 1930s into the 1980s — an era with no serious financial crises or bailouts. Our current financial woes stem from the systematic dismantling and deregulation of this system over the past 30 years.

State-run banks?

But we also need to learn from more recent economic experiments. As Ellen Brown notes for Yes! Magazine, the state of North Dakota has been largely insulated from much of the fallout from the financial crisis of 2008. Part of the reason for the state’s relative stability lies in the fact that it operates its own bank.

North Dakota’s direct supervision of one institution among the hundreds of banks that operate in the state has helped insulate it from the credit storm on Wall Street. The state has its own engine of credit, and can keep funds flowing to businesses that need it, even in the middle of a crisis.

The prospect of state-run banking may seem radical, but it isn’t. It’s a practical proposal based on the established, real-life success of the Bank of North Dakota. As Brown notes, five other states have legislation pending that would create their very own banks — Massachusetts, Virginia, Washington, Illinois and Michigan, while Hawaii recently approved a study to determine the usefulness of a bank run by that state.

The financial reform bill the Senate just passed was a good start, but we’ve got a long way to go. We’re not going to get there without a committed community of progressive activists who demand that the economy serve society, not only entrenched corporate interests.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. 

photo credit: thanks to arriba via flickr
by Zach Carter, Media Consortium blogger


Jonathan Y.
Jonathan Y7 years ago

Our legislators could do 1 simple thing that would separate investment banks from traditional banks:

Reinstate the Glass-Steagall rule! It doesn't take a Phd in economics to understand that gambling huge pension funds on wobbly real estate CDOs or derivatives will lead to disaster. We should be "Enraged Citizens vs Greedy Bankers".

Morgan G.
Morgan Getham7 years ago

I find it interesting that the Huffington Post is running a column featuring a Fed banker defending the free-market idea that banks ought to be allowed to fail, and that propping them up via government bailouts unfairly subsidizes high-level risk-taking at the expense of their more responsible competitors.

Who'd have thought of HuffPo as a bastion of free market thinking?

carole a.
.7 years ago

I really like Christopher Hayes' writing and subscribe to the Nation. I also like the writer's comments about money. Don't forget the hour is getting late. The game is fixed. Just my opinion, corporations must be stopped. They don't fight fair. Should we?

Mary L.
Mary L7 years ago

As usual.. the large threaded metal object protruding from your back is nothing, just ignore it, it'll go away, won't it?

Doug Wilson
Doug Wilson7 years ago

There is a much better way to get things done than begging the government who did the deed in the first place. We could use this simple analogy: Say you work for me (like elected officials are supposed to), you start doing the job I gave you like you want to, instead of how I want you to.

What is the best way to get you back on track? Simple, I tell you if you want to get paid you need to get your head on straight and do the job the way I told you to. No results - no money.

The fastest, surest way to communicate in a monetary system is with money. Everything you dislike is a result of money. So why keep supplying money?

Wars, financial crimes against the public, unlawful imprisonment, the assault on the constitution is made possible because the public supports it - with their money. There are places set up to help the people of the US get their lives back.

I have a few of them listed at the bottom of this web page:

Ask me for more, through the email link provided there

Edward M.
Edward M7 years ago

It's like our bailout of the banks in the UK. Money was borrowed and poured into the banks without first establishing any ground rules. Our banks still decide for themselves just how they will behave; an example is the refusal of the banks to carry out the primary task for which they were established, and that is to lend money with appropriate safeguards, the lack of the latter the main reason for this banking collapse. Without our Government having insisted on having some control over these banks, these banks have gone back to business as usual with certain restrictions, namely, very, very selective lending and the resumption of big bonuses; that our Governments can so stupidly allow these financial institutions to carry on as though nothing has happened, if this legislation that is going through your Senate, at present, is anything to go by, speaks volumes about your electorate.
The Greeks are showing us the way that we should oppose these "cuts" to our welfare and general living standards, that is if we manage to summon up the courage to follow suit.
The 'Blitz' spirit? The land of the 'free', home to the 'brave'? I haven't seem much of any in your Country or mine!

Michael Rains
Past Member 7 years ago

The countries banks that weathered the storm best were the ones that werent engaged in wall street type activities.
Unfortunately untill the average american turns off the goggle box and actually wants to take action its only gonna get worse.
Its kinda funny how we subsidise the big guys or how its ok to tax us but tax them they scream communist, regulate what we own- buy or how the little guy runs his business thats ok but regulate them and its unamerican.
its like the bad old days of the monied gentry of europe the aristocratic nonsense of the czar or of the french monarchy and we all know what happened too them!.
(hint hint militia types and tea baggers)

Sherylee Harper
Sherylee Harper7 years ago

It would be real interesting to find out how many of the legislators are owned out right by Wall Street?

Arthur J.
Arthur Joyce7 years ago

Thanks Zach, for hitting the nail on the head. I've been saying this for years: the deregulation of reforms that had their beginnings in the Great Depression is what has brought us to this state. This is always the danger of capitulating to a corporatist state: they will do all they can to steal your money, and best of all, with government assistance! What is needed is a Corporate Responsibility Act which requires corporations to have the same social and environmental responsibilities an ordinary citizen does. If they pollute, they must pay to clean it up, not rely on taxpayer money. If they engage in casino-like money markets, they should be allowed to go down. Isn't that the capitalist creed anyway? Finally, a state-owned and controlled bank (instead of the privately-owned Federal Reserve) should be created. This could provide low interest loans to the millions of small businesses that keep any country running. There are more of us than there are of them; let's start using our power, people!

Charlene R.
Charlene Rush7 years ago

Gee, and just how long did it take them to take this small step?

Incumbents, be aware, some of you have already been replaced and more of you will go the wayside. We cannot take the word of any politician 'at face value'. They must be constantly, replaced, since they will never vote for term limits.

If we actually, have a RESPONSIBLE politican in place, 2 terms in and 1 term out. They can always be voted back to replace an irresponsible one. Career politicians were not meant to be.