“We’re talking about the absence of a law that clearly protects your money when being handled by any financial institution…”
Well, we’ve been through the initial political party debates, heard their positions, listened to their attacks and defenses but it is early yet; future debates should better define the candidates’ positions if elected president. For now the candidates are positioning themselves to create soundbites and undermine each other’s position but not much is said of any substance.
There was one exception; a comment made by Maryland Governor Martin O’Malley at the Democrat debate. O’Malley came out loud and clear during the frequent references to what we now call income inequality. O’Malley relied on the facts; a very small number of Americans are getting richer and the rest (some say 99% but it is better stated as the Middle Class) are treading financial water or falling behind.
So what did Martin O’Malley say that could solve these problems? Return to Glass-Steagall. A Depression-Era law that kept banks from risky investments, created the FDIC, and put in place protections that were not there when the economy went into depression 80 some years ago.
It was November 12, 1999 when Congress decided to end Glass-Steagall. The arguments were what would be expected; G-S is an old law that no longer fits into the current economy and how things are done. Competition will increase, driving prices down for consumers. Financial institutions will prosper. All will prosper, all will be good.
But there was one Congressman who opposed the repeal; his name is John Dingell who just retired as the Democrat Representative from Michigan. Dingell said this as the house was getting ready to vote on the repeal; “What we are creating now is a group of institutions which are too big to fail. Not only are they going to be big banks, but they’re going to be too big everythings; they’re going to be into securities and insurance; in the issuance of stocks and bonds and underwriting and they’re also going to be in banks.” Dingell said further, “Taxpayers are going to be called upon to cure the failures we’re creating tonight. And it’s going to cost a lot of money and its coming, just be prepared for those events.” “…the fed is going to be in and other federal agencies are going to be in to bail them out. Just expect that.”
Of interest was candidate Hillary Clinton’s response to O’Malley that Dodd-Frank, the bill passed several years back to rectify the damage of Glass-Steagall evident in 2007 and 2008 but suffered from amendment. The crowning achievement of Dodd-Frank is the Consumer Financial Protection Board, opposed by conservatives, since those protections disappeared with the repeal of Glass-Steagall. Clinton pointed that out but it should be noted that it was her husband who promoted and signed the bill to repeal Glass-Steagall along with a bi-partisan Congress.
We’re not talking about taking from the rich and giving to the poor here. We’re talking about the absence of a law that clearly protects your money when being handled by any financial institution, a need that the 2008 Great Recession proved necessary.
There are a lot of presumptions made at this point in the campaign and there is usually a winner picked if only in the back of our minds. While the Republicans have yet to produce the ‘likely’ candidate, Democrats seem to favor Hillary Clinton. The unfortunate thing about election scenarios is that we tend to go along with the presumed pick while people who actually said something or offered a viable solution fade to the background, just like John Dingell. Just like Martin O’Malley.
Video of DIngell’s floor speech on repealing Glass-Steagall on November 12, 1999
A ten minute video explaining Glass-Steagall and who was behind its repeal.
Hamilton on Congress
Dysfunction Exacts a Cost
By Lee H. Hamilton
“We are getting a reputation as a nation that cannot deal with many of its problems.”
Earlier this month, The Economist, the renowned British weekly, ran an editorial advocating an end to the U.S. dollar’s supremacy as the world’s chief currency. The magazine offered several economic motives and one supremely political one. “For how long,” its editors wrote, “will countries be ready to tie their financial systems to America’s fractious and dysfunctional politics?”
I want to be blunt here. Congress’s inaction on a host of important issues – its inability to deal with our problems – is doing real damage to our country. It undermines our ability to lead in the world and causes undue economic and social hardship at home.
What strikes me hardest about that sentence in The Economist is that it reflects a sobering truth: people both at home and abroad now accept that our current unworkable politics shows no sign of changing and could intensify. We are getting a reputation as a nation that cannot deal with many of its problems.
The truth is always complex. You will find plenty of mayors, governors, state legislators, and even federal officials who don’t have the luxury of gamesmanship; they confront problems and solve them, often with great creativity. Those who discount us forget that we have a deep bench.
Yet if you look ahead at the next few months, it’s hard to avoid a sinking feeling. The leadership battles put the Congress in even greater disarray just before a series of critical fiscal deadlines. Congress has to raise the debt ceiling by early November. It needs to craft a long-term budget deal. It has to come up with a multi-year plan for highway spending. It needs to reauthorize the Export-Import Bank, which helps American businesses sell their goods overseas. It has to decide what to do with a series of tax breaks that are due to expire. These things will not happen without a great deal of turmoil.
That’s because congressional politics today are bewildering, free-swinging, unscripted, and unprecedented. I can’t figure out how so many members of Congress reached a point where they cannot accept the fundamental political reality of our times. You need 60 votes to move legislation in the Senate, along with 67 votes to override a veto in the Senate and 290 votes to do so in the House. With the White House controlled by one party and Congress controlled by the other, those numbers are the fundamental fact of legislative life. They force a choice on members of Congress: to protest, make speeches, and strike ideological positions; or to govern. Too many members are opting for the first choice.
Yet if we’re to get out of this mess, the starting point is to recognize the political reality of divided government. The parties have a right to their own hopes and aspirations, but they also need to take seriously the responsibility to govern. They need to find a way past the unhappiness and anger that are evident in the country at large.
Given the seriousness of our problems and the lack of progress on the policy agenda Congress is supposed to handle, there’s really only one way forward: through negotiation and compromise. This has never been easy – learning to compromise on the issues without compromising one’s own principles – but it’s especially challenging now, when I worry that striking a deal has become a lost art.
Still, certain steps seem obvious. The congressional leadership must let the Congress work its will. Members should be allowed to vote straightforwardly on the major policy issues of the day, without leadership manipulating the process to control the result. The House should reject the Hastert Rule, under which a majority of the majority caucus is required to bring a bill to the floor. And both houses need to stop the outrageous use of huge omnibus bills adopted by short-cutting time-tested regular order procedures.
If Congress does not learn to compromise and negotiate, the country is headed for even deeper trouble than we are currently in. U.S. world leadership will slip, our ability to deal with economic and social issues at home will deteriorate, and the electorate will become even more embittered. Our future is in Congress’s hands. It would be nice if they recognized it.
Lee Hamilton is a Distinguished Scholar, Indiana University School of Global and International Studies; and Professor of Practice, IU School of Public and Environmental Affairs. He was a member of the U.S. House of Representatives for 34 years.
The Defense Bill and the President’s Possible Veto
From the House floor October 21, 2015 = Mr. Thornberry (Chair, House Armed Forces Committee) asked unanimous consent That if a veto message on H.R. 1735 is laid before the House, then after the message is read and the objections of the President are spread at large upon the Journal, further consideration of the veto message and the bill shall be postponed until the legislative day of Thursday, November 5, 2015; and that on that legislative day, the House shall proceed to the constitutional question of reconsideration and disposition of such question without intervening motion. Agreed to without objection.
Opposition and HR 3762 (Repealing the ACA)
“The Rules Committee rejected a motion by Ms. Slaughter of New York to add an amendment which calls for bipartisan, bicameral negotiations to raise the Budget Control Act’s discretionary spending caps and establish appropriate offsets to allow appropriations action to proceed and to avoid a government shutdown. If the negotiations do not lead to a deal enacted by November 16, 2015, the caps for 2016 are automatically raised to the level in the president’s budget, eliminating the sequester for non-defense discretionary programs and providing the same amount of sequester relief for defense programs. “
Opposition to HR 1937 (Mineral Mining)
“ The bill would reduce or eliminate environmental reviews, and give mining companies control over the timing of permitting decisions, for virtually all types of mining operations on federal public land, not just those involving strategic or critical minerals. It does this by defining “strategic and critical” minerals so broadly that they would include everything from minerals like gold, silver, copper and uranium (which are critical to defense, energy infrastructure & production, and manufacturing) to plentiful materials such as sand, clay, gravel and potentially even coal. “
Quotes on the Issues
HR 692 would allow some debts to be paid by Treasury even if the debt limit is not increased by allowing the Treasury to continue to borrow some money.
Opposition to the bill is Bipartisan
Doug Holtz-Eakin, former CBO Director, McCain campaign advisor, and Bush CEA Chief Economist: “You open a hornet’s nest of nightmares and difficulties for the Treasury, literally — which legal promises on either debt or programs are you going to break?” [The Hill, 10/16/15]
Steve Bell, former Republican staffer with the Senate Budget Committee, now at the Bipartisan Policy Center: “The economic impact of the United States government not honoring … literally billions of dollars’ worth of domestic commitments, bills, beneficiaries, I think it would change the nature of the United States. Call it a default, call it a technical default; it doesn’t make any difference. You’re not paying the bills you owe on time and in full. …. As a practical matter, it just can’t be done.” [New York Times, 1/17/13]
Tony Fratto, former Treasury Department assistant secretary and senior George W. Bush White House staffer: “The idea that Treasury could prioritize – even if desired – is fanciful & misunderstands federal financing requirements.” [AEI Blog Post, 1/15/13]
Keith Hennessey, former President George W. Bush’s National Economic Council director: “Payment prioritization doesn’t stop payments, it just delays them. Then the aggrieved party sues the government, and probably wins, and it turns into a bloody mess.” [1/14/13]
S&P Managing Director of Sovereign Ratings David Beers: “It would mean a very sudden fiscal shock that the longer it lasted would filter powerfully through the system. Potentially that would be deeply disruptive to the economy.” [Reuters, 7/26/12]
JP Morgan Chief Economist Michael Feroli: It “would be like the financial market equivalent of that Hieronymus Bosch painting of hell.” [Washington Post, 1/14/13]
Congress has a responsibility to protect the full faith and creditworthiness of the United States with a clean bill to pay America’s bills, yet House Republican leaders are once again risking default with political games. Several Republicans – including Speaker Boehner, Ways & Means Chairman Ryan, and Financial Services Chairman Hensarling – as well as business community leaders, economists, and organizations know that taking us to the brink of default is bad policy:
Senate Budget Committee Republicans: “In a budget bulletin, economist William Beach, who formerly worked at the Heritage Foundation, warns the nation risks higher borrowing costs if it even gets close to exhausting the extraordinary measures used to avoid hitting the debt limit…Even a momentary failure to pay the nation’s debts could cause long-term increases in borrowing costs, Beach said…” [Roll Call, 10/2/15]
Speaker John Boehner (R-OH): “I think raising the debt limit is the responsible thing to do for our country, the responsible thing for our economy… if we were to fail to increase the debt limit, we would send our economy into a tailspin.” [WSJ, 3/2/11]
House Ways & Means Chairman Paul Ryan (R-WI): “Some conservative Republicans have urged their GOP colleagues to resist raising the ceiling…. But House Budget Chairman Rep. Paul Ryan says that tactic isn’t viable. ‘Just refusing to vote for it, I don’t think that’s really a strategy,’ he said, noting that a failure to raise the ceiling could result in the nation defaulting on its debts to investors. ‘Will the debt ceiling be raised? Does it have to be raised? Yes,’ he said at an event sponsored by economics21 and the Manhattan Institute at the National Press Club Thursday.” [NBC News, 1/6/11]
House Financial Services Chairman Jeb Hensarling (R-TX): “House Republican Conference Chairman Jeb Hensarling (Texas)… said on CNN’s ‘State of the Union’ that not raising the debt ceiling is not an option… ‘What I do think is, yes, it would be catastrophic to have the nation default upon its debt,’ Hensarling said.” [The Hill, 4/10/11]
Doug Holtz-Eakin, head of American Action Forum and a former director of the Congressional Budget Office: “The first thing you’ll see is a market reaction…Then you’ve got dramatic impacts on consumer confidence, the world’s melting down again and they go into an economic fetal position … There’s just no good news there.” [The Hill, 10/16/15]
AARP: “Honoring the full faith and credit of the United States is a core value of our country and fundamental to the economic security of all Americans, not just retirees. As such, the impact of defaulting on any U.S. debt obligation would be felt by all Americans, not just those on Social Security and Medicare… Our members are worried that the benefits they have earned may be cut as part of a deal to reduce the deficit, fund government operations, or increase the debt ceiling, and they are increasingly worried that if there is no agreement very soon, they may not receive their Social Security checks and may lose access to their health care.” [Letter, 10/20/15]