Glass-Steagall Debate in the Campaign and in the Fed
April 8, 2016 (EIRNS)—The administration’s flagship Washington Post felt compelled this morning to publish its lead editorial as an attack on the Glass-Steagall Act, and on candidate Bernie Sanders for calling for breaking up the Wall Street banks.
The editorial strongly supported Hillary Clinton for opposing Glass-Steagall, and dragged out a real potpourri of nonsensical "criticisms" such as "breaking up the banks is a step many experts warn may not be worth the costs." And "nostalgia for an economy more based on manufacturing ... provides an insufficient basis for remaking the world’s largest economy." That was, in fact, a primary reason—the need for credit for production—advanced by Sen. Elizabeth Warren for reinstating Glass-Steagall, in an interview with American Prospect. The Post may have forgotten about the "Senate Manufacturing Caucus" formed by Hillary Clinton in 2004, which did absolutely nothing.
Fed Chair Janet Yellen came out against Minneapolis Fed President Neel Kashkari’s call for breaking up the banks, in a forum in New York today. Together with former chairs Bernanke, Volcker, and Greenspan, Yellen said that although she encourages debate and discussion among the district Fed banks, there is no need to break up the Wall Street banks, since "we have made them safer and stronger."
Indicating a sharp internal debate, the Federal Reserve board of governors has called a meeting "under expedited procedures" (i.e., an unscheduled and unusual emergency meeting) on interest rates for Monday, April 11, two days before its scheduled monthly meeting. Even more than the outbreak of "break up the banks," the fight is likely over raising rates. New York Fed chief William Dudley gave a speech in Connecticut this morning saying the Fed should be very wary of raising again because of the difficulties of reversing and going down again. Said Dudley, "I still judge the balance of risks to my inflation and growth outlooks to be tilted slightly to the downside."
At the same time, Yellen was sure to talk a lot about the "tendency for stronger growth" in the U.S. economy. This was complete lying, as every new report (today: consumer spending dropping in March, business inventories dropping in March, truck orders collapsing by 40%) makes clear that GDP growth was just about zero in the first quarter.
Meanwhile, all press are reporting that Jamie Dimon, in advance of JPMorgan Chase shareholders meeting, urged rejection of proposals to break up the bank by "selling all non-core banking business segments, such as investment banking and trading." The proposals were advanced by Bartlett Naylor Public Citizen, which owns small amount of stock.