A few weeks ago I read a blog post (can’t remember where anymore) in which the author mentioned Louis Brandeis’s book Other People’s Money and How the Bankers Use It. The book was written in about 1913 and was originally serialized in Harper’s Weekly, and the blogger, whoever he or she might have been, said that the book might just as well have been written today. I downloaded a copy (it’s quite cheap) and just finished reading it, and I’m writing this to recommend it. It’s like reading today’s papers, except the large numbers he throws around, (figures in the millions or single billions) seem ludicrously small today. The games the same, and if you knew nothing about Franklin Roosevelt, you’d think nothing had changed since 1913.
Brandeis points out that the “dominant element in our financial oligarchy is the investment banker”; that the investment banker’s stock in trade was financial manipulation that often left the companies they controlled bankrupt; and that they benefitted from assisting those companies as they engaged in illegal activity by getting commissions for the sale of securities designed to violate anti-trust laws and then got commissions for the sale of securities that the same companies were forced to issue when they got caught and had to pay the piper. The bankers of course, like today, were never punished. He even points out that like today, the bankers warned that putting the brakes on the oligarchs would “affect every wage earner from the Atlantic to the Pacific” and goes on to demonstrate that there wasn’t (and isn’t) an ounce of truth in the claim.
I am not an economist by trade, and I haven’t read a lot of economic history, so it may very well be that some of the ills Brandeis diagnosed are not being repeated today. We don’t have blatant trust building anymore, but on the other hand, we still have problems with interlocking directorates and bankers who operate with inherent conflict of interests as a matter of course. In fact, even Brandeis would probably be surprised at a state of affairs in which it is not per se illegal to design an investment vehicle to fail, whether or not it can be proven that the bank doing the designing actively misled investors. Brandeis would surely conclude that nothing has changed were he to read this oh-too-true summary by Pam Martens at Wall Street on Parade.
The Wall Street cartel now controls everything from interest rates set by a rigged Libor benchmark to the price of aluminum going into the price of a can of Coca-Cola, to the cost of crude oil and the fleecing of your wallet at the gas pump, to the shrinking budgets of cities and towns paying out to Wall Street on rigged interest-rate swaps. Why wouldn’t Wall Street expect to continuously control the White House and the Fed?
Brandeis points out as well that the bankers were in many instances little more than taxing authorities that returned nothing in services for the fees that they charged. Like today, they commanded outsize fees for performing services that added little or nothing to the financial products they were peddling.
What’s deeply depressing is the fact that we did, in fact, take steps to halt or curb most of the excesses Brandeis identified. Starting in the 80s, and accelerating in the 90s, the political parties entered into a contest to see who could dismantle the laws that had kept bankers in their place, and the economy fairly stable, for almost half a century. We are now reaping the fruits of that insanity, and the most depressing aspect of it is that the people who brought us this depression have suffered no consequences. The criminal bankers go free and Larry Summers, an architect of deregulation, may soon be heading the fed.
Anyway, download the book. It’s a quick and educational read.
Post a Comment