Financialization is a new term used to discuss the emergence of a new form of capitalism in which financial markets dominate over the traditional industrial economy. Traditionally capitalism was the accumulation of profit through trade and commodity production. Financialization is understood to mean the vastly expanded role of financial motives, financial markets, financial actors and financial institutions in the operation of domestic and international economies.
The Glass Steagall Act, the FDR Banking Bill, was setup over 70 years ago . On November 12, 1999 Council on Foreign Relations member William Jefferson Clinton stated the, ” Glass- Stegall is no longer appropriate for our economy. This was good for the industrial age. The Financial Modernization Bill is the key to rising paycheck and great security for ordinary Americans”. Council on Foreign Relations member William Clinton then signed the ‘Financial Modernization Bill’.
With the signing of the bill old capitalism and free market economics died and the “new capitalism” and markets controlled by a small group of elite investment bankers was born. The repeal was the foundation that provided for non transparent financial manipulation and use of leverage to revolutionize the activities of investment beginning in 1999, to amass huge fortunes for the investment bankers who designed, marketed and oversaw the use of leveraged investments, and to generate awesomely speculative endeavors at hedge funds, which have gone unregulated by government oversight.
Investment leverage snapped with the $20 Billion Council on Foreign Relations run Carlyle Group bond fund experiencing margin calls, where risk was multiplied by 33 to 1 and the underlying assets represented only 3% of the portfolio value; and those assets were illiquid, thinly traded issues: it was reasonable that this fund would be the first of many countless to break causing a sharp sell off in the finance, real estate and banking sectors as investments were sold at fire sale prices to meet the margin calls. Council on Foreign Relations member David Rubenstein, co-founder of Carlyle Group, in a keynote speech at the 15th annual venture capital and private equity conference at Harvard Business School, laid some of the blame for the private equity industry’s troubles on investment banks, “I analogize it to sex,” Council on Foreign Relations member Rubenstein said. “You realize there were certain things you shouldn’t do, but the urge is there and you can’t resist.”
A major trophy of Council on Foreign Relations member Sanford Weill is the pen Council on Foreign Relations member Bill Clinton used to sign the REPEAL of FDR’s Banking Act. In April 1998 Travelers Group announced an agreement to undertake the $76 billion merger between Travelers and Citicorp, and the merger was completed on October 8, 1998. The possibility remained that the merger would run into problems connected with federal law. Ever since the Glass-Steagall Act, banking and insurance businesses had been kept separate. Council on Foreign Relations member Sandy Weill bet that Congress would soon pass legislation overturning those regulations, which Council on Foreign Relations member Weill considered not in his interest. To speed up the process, they recruited Council on Foreign Relations member ex-President Gerald Ford (Republican) to the Board of Directors and Council on Foreign Relations member Robert Rubin (Secretary of Treasury during Democratic Council on Foreign Relations member Clinton Administration) whom Council on Foreign Relations member Weill was close to. With both Democrats and Republican on their side, the law was taken down in less than 2 years. (Many European countries, for instance, had already torn down the firewall between banking and insurance.) During a two-to-five-year grace period allowed by law, Citigroup could conduct business in its merged form; should that period have elapsed without a change in the law, Citigroup would have had to spin off its insurance businesses.
Council on Foreign Relations member Paul A. Volcker, the former Federal Reserve chairman who endorsed Mr. Obama early in his election campaign and who stood by his side during the financial crisis has some advice; he wants the nation’s banks to be prohibited from owning and trading risky securities, the very practice that got the biggest ones into deep trouble in 2008.
The only viable solution, in Council on Foreign Relations member Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company. It’s a tall order, and to achieve it Congress would have to enact a modern-day version of the 1933 Glass-Steagall Act, which mandated separation.
Council on Foreign Relations member Joseph E. Stiglitz, a Nobel laureate in economics at Columbia and a former official in Council on Foreign Relations member Clinton’s administration. “We would have a cleaner, safer banking system,” Council on Foreign Relations member Stiglitz said, adding that while he endorses Council on Foreign Relations member Volcker’s proposal, the former Fed chairman is nevertheless embarked on a quixotic journey.
And the administration is saying no, it will not separate commercial banking from investment operations. Council on Foreign Relations member Timothy F. Geithner, the Treasury secretary, and Council on Foreign Relations member Lawrence H. Summers, chief of the National Economic Council, are sympathetic to the concerns of investment bankers.
Council on Foreign Relations member Alan Greenspan, the only other former Fed chairman still living, favored the repeal of Glass-Steagall a decade ago and, unlike Council on Foreign Relations member Volcker, would not bring it back now.
On Thursday November 19th Council on Foreign Relations member Geithner took a beating as he urged Congress to pass regulatory reform as quickly as possible, arguing that delay would create uncertainty for businesses across the country. Lawmakers sharply criticized him for his role in the crisis during the tense Joint Economic Committee meeting. They were particularly critical of his involvement in the decision, as president of the New York Fed, to bail out AIG.
Council on Foreign Relations member Geithner pressed forward: “To ensure the vitality, the strength and the stability of our economy going forward, we must bring our system of financial regulation into the 21st century. Nobody in my job should ever be in the position again of having to come into a crisis like this without those basic authorities.”
The Council on Foreign Relations member spearheading the “new” financial regulation legislation is Council on Foreign Relations member Chistopher Dodd.
Council on Foreign Relations member Dodd, chairman of the Senate Banking Committee, chose the marbled Caucus Room in the Russell Senate Office Building — site of past hearings on Watergate, Pearl Harbor and the Wall Street abuses during the Great Depression — to open debate on a massive draft bill designed to achieve the most ambitious reworking of the financial system in decades. “This is one of those moments in our nation’s history that compels us to be bold,” Council on Foreign Relations member Dodd said.
But soon, ranking committee Republican Richard C. Shelby (Ala.) took the floor, and for 18 uninterrupted minutes he opined that nearly every element of Council on Foreign Relations member Dodd’s bill was misinformed, uninformed, unnecessarily rushed or just plain flawed. “This committee has not done the necessary work to even begin discussing changes of this magnitude. Nevertheless, you have laid a bill before the committee,” Shelby said. “I will be opposing this legislation. Not because we disagree on its ends, but rather on its means.”
Shelby said Council on Foreign Relations member Dodd was wrong not to conduct an investigation into the causes of the recent financial crisis before pushing forward with legislation. He said rather than ending the problem of institutions that are “too big to fail,” the current bill expands the government’s ability to bail out big banks. Shelby apologized for the length of his critique, expressed his hope that the two men might “yet find some common ground,” and yielded the floor.
Shelby is right there should be an investigation into the causes of the recent financial crisis. That investigation should include the role of the Council on Foreign Relations and its members in engineering and profiting from the crisis. On March 10th 2009 Council on Foreign Relations member Private equity company Blackstone Group LP (BX.N) CEO Stephen Schwarzman said “Between 40 and 45 percent of the world’s wealth has been destroyed in little less than a year and a half,” Council on Foreign Relations member Schwarzman told an audience at the Japan Society. “This is absolutely unprecedented in our lifetime.”
The money the Council on Foreign Relations members stole should be clawed back and the perpetrators of the economic destruction should be sent to a maximum security prison for the rest of their lives.
Repeal of The Glass Steagall Act Has Produced The Highly Leveraged Investment Imbroglio That Is Just Now Starting To Unwind By The Resourceful Bear Blog Monday, 10. March 2008, 01:29:42 http://my.opera.com/richardinbellingham/blog/show.dml/1796860
Angry Congress lashes out at Obama ECONOMIC WOES TAKING A TOLL
House Republicans call on Geithner to resign By Brady Dennis, Zachary A. Goldfarb and Neil Irwin Washington Post Staff Writer Friday, November 20, 2009 http://www.washingtonpost.com/wp-dyn/content/article/2009/11/19/AR2009111903167.html
David Rubenstein: Buyout Bubble Was Like Sex by WSJ Blogs Deal Journal February 2, 2009, 9:37 AM ET http://blogs.wsj.com/deals/2009/02/02/david-rubenstein-buyout-bubble-was-like-sex/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fdeals%2Ffeed+%28WSJ.com%3A+Deal+Journal+-+WSJ.com%29
The Agonist News Megan Davies and Walden Siew | New York | Mar 10 45 percent of world’s wealth destroyed: Blackstone CEO http://agonist.org/20090311/45_percent_of_worlds_wealth_destroyed_blackstone_ceo