In 1933, a few years following the stock market crash, Congress passes the Glass-Steagall Act, in hopes that regulating banks will help prevent market instability, particularly amongst Wall Street banks. The purpose of the act is to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers.

The Glass-Steagall Act provided the proper oversight and entity separation that would prohibit banks and other financial companies from merging into giant trusts (conflict of interests) -- giant trusts or corporations being more powerful, naturally, and having the seemingly limitless capital to lobby their corporate interests, however, with a very myopic scope (particularly when it comes to factoring in potential losses -- most banks, as seen in contemporary times, chose not to anticipate losses in the mortgage market; they presumed home prices would continue to appreciate).

In 1999, former Senator Phil Gramm (who is, incidentally, Senator John McCain's economic adviser and cochairs his presidential campaign) set out to completely gut the Glass-Steagall Act, and did so successfully, replacing most of its components with the new Gramm-Leach-Bliley Act: allowing commercial banks, investment banks, and insurers to merge (which would have violated antitrust laws under Glass-Steagall). Sen. Gramm was the driving force behind the Gramm-Leach-Bliley Act, as he had received over $4.6 million from the FIRE sector (Finance, Insurance and Real Estate donations) over the previous decade, and once the Act passed, an influx of "megamergers" took place among banks and insurance and securities companies, as if they had been eagerly awaiting the passage of Gramm's Act. [...]

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. ... The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

As of 2003, financial organizations with assets in excess of $10 Billion owned 73% of all banking industry assets, and organization with assets between $1 Billion and $10 Billion or more hold another 13 %. That's up from a 43% share by these Super Large Institutions in 1984 at the height of the Reagan era's first wave of financial consolidation. Think of that. Three quarters of all banking assets are owned by the largest financial companies in America. Indeed, Bank of America alone, with $870 Billion in assets held 9.6% of that total. Just for comparison's sake the 3,683 smallest banking organizations (i.e., your basic community banks, credit unions, etc., with $100 million in assets or less apiece) accounted as a group for only $192 billion of assets, or less than one quarter of what Bank of America owns!

Yet consolidation of financial assets in the hands of a few mega-corporations is but one consequence of deregulation (still one of the primary planks of the Republican economic platform). For along with massive consolidation, other bad consequences flowed from that lack of governmental oversight and regulation. For example, excessive risk taking by these very same ultra large financial companies, followed by corporate welfare bailouts when many of these bets don't pay off:

. . . Over the last twenty years, U. S. deregulation of the financial sector has been based on developing what I would call predator financial capitalism, that is to say the systematic encouragement of excessive risk taking (moral hazard) and of corporate greed in general, the development of the pyramidal $2.5 trillion hedge fund industry, the practice of highly-leveraged buyouts (LBOs) of healthy companies with their own high-yield debt, also know as "bootstrap" investments, and the practice of program trading. Moreover, this was a system that was not only risky but also fraught with shady activities.

To accomplish this deregulation or non-regulation of the financial sector and to encourage the over-indebtedness of the U.S. economy, a whole series of safeguards that had been wisely established to prevent a repeat of the financial and economic disasters of the 1930's were dismantled and cast aside. The last one in line was the reckless abolishment by the U.S. Securities and Exchange Commission (SEC) of the speculative prevention rule called the downtick-uptick rule (which prohibited short-selling when stock prices were falling), in July 2006. Such safeguards had been put in place in order to avoid systemic financial instability, to make financial institutions more responsible to users and to avoid costly government bailouts when large financial institutions fail. Today, we are back to the 1930s with large financial institutions reaping huge profits and paying obscene salaries to their CEOs in good times and with government bailing them out with public money when things turn sour.

In other words, we have reverted under DLC and Republican rule to the "boom and bust" cycles in the financial industry that were experienced in the Gilded Age, the last time Wall Street Speculators essentially controlled our financial markets because of the inability and unwillingness of the Federal Government to impose any controls on what they could or could not do. As anyone who experienced (or who has studied the history of) the Great Depression knows, such unfettered predatory capitalism is a recipe for disaster.

So, what is the point of my little missive this morning besides putting a wet blanket all over your Happy Sunday rest and relaxation? That despite all the punditocracy's blather on cable TV and elsewhere in the media about Sarah Palin's star power, McCain's POW experience and mavericky goodness, and Obama's elitist, intellectually cool patriotism problem, it's still "The Economy Stupid!" And the economic policies implemented by our Republican, Business and Wall Street Elites have led us down the path to economic ruin. Bush's action to let the Treasury assume control of Fannie and Freddie is simply one more indication of how serious matters really are (even if the Bushies and McCain are attempting to avoid any mention of it in the popular media), and of the utter hollowness and bankruptcy of Republican/conservative economic ideas.

If we don't elect officials who utterly reject that agenda this Fall because of the misdirection and obfuscation the GOP's lies and propaganda, propaganda all too willingly spread by a compliant and enabling US news media, we, collectively, as Americans, will have only ourselves to blame.