Friday, September 19, 2008

History Repeating: America In The Gilded Age: Past, Present & The Commodity Futures Act...


"The saga of American wealth creation, both for the nation and for its enterprising capitalists, reached its apotheosis during the Gilded Age, a period roughly delimited by the end of Civil War and the beginning of World War I. The Gilded Age ended sometimes in the first third of the 20th century, Some cite the 15th of April 1912, the night when the ocean liner Titanic sank. Others mention World War I or the stock market crash of October 24, 1929. All these events certainly had an impact on the factors which put an end to the Age of Moguls in America. The Titanic disaster taught mankind that there were still limits to where it could go. World War I started a process in which the power of the federal government was increased against the power of the tycoons, a process which would be furthered by the depression which followed the stock market crash of 1929. But what really put an end to the Gilded Age or the age of the moguls, was the introduction of income and estate taxes during the Wilson administration. Corporate and income taxes rendered wealth accumulation slower and more difficult, whereas the estate taxes prevented the perpetuation of wealth in the hands of the founding families."


" How Did We Get Here This Time? That's pretty easy to answer, too. His name is Phil Gramm. A few days after the Supreme Court made George W. Bush president in 2000, Gramm stuck something called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit "swaps." These are instruments like sub-prime mortgages bundled up and sold as securities. Under the Gramm law, neither the SEC nor the Commodities Futures Trading Commission (CFTC) were able to examine financial institutions like hedge funds or investment banks to guarantee they had the assets necessary to cover losses they were guaranteeing. This isn't small beer we are talking about here. The market for these fancy financial instruments they don't expect us little people to understand is estimated at $60 trillion annually, which amounts to almost four times the entire US stock market.

And Senator Phil Gramm wanted it completely unregulated. So did Alan Greenspan, who supported the legislation and is now running around to the talk shows jabbering about the horror of it all. Before the highly paid lobbyists were done slinging their gold card guts about the halls of congress, every one from hedge funds to banks were playing with fire for fun and profit."


"In fact, it really does look as if the foundations of US Capitalism have shattered.

"Nothing will be like it was before," said James Allroy, a broker who was brooding over his chai latte at a Starbucks on Wall Street. "The world as we know it is going down."

Many are drawing comparisons with the Great Depression, the national trauma that has been the benchmark for everything since. "I think it has the chance to be the worst period of time since 1929," financing legend Donald Trump told CNN. And the Wall Street Journal seconds that opinion, giving one story the title: "Worst Crisis Since '30s, With No End Yet in Sight."

The only thing that is certain is that the era of the unbridled free-market economy in the US has passed -- at least for now. The near nationalization of AIG, America's largest insurance company, with an $85 billion cash infusion -- a bill footed by taxpayers -- was a staggering move. The sum is three times as high as the guarantee provided by the Federal Reserve when Bear Stearns was sold to JPMorgan Chase in March.

The most breathtaking aspect about this week's crisis, though, is that the life raft -- which Washington had only previously used to bail out the mortgage giants Fannie Mae and Freddie Mac -- is being handed out by a government whose party usually fights against any form of government intervention. The policy is anchored in its party platform.

"I fear the government has passed the point of no return," financial historian Ron Chernow told the New York Times. "We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams."

The Past: -Drew Caradine Shouter, ("A Classification of American Wealth: History and Genealogy of the Wealthy Families of America," 2008). The Present: -James Moore, ("A Nation of Village Idiots," Huffington Post, 9.18.08). The Future: -Marc Pitzke ('The World As We Know It Is Going Down,' Der Spiegel Online International, 9.18.08. Image: "Liberty Not Anarchy," 19th Century Labor Print, Southern Labor Archives, Special Collections, Georgia State University, Harper's Weekly, 9.4.1886).


bruce said...

And the CRE (community reinvestment act) had nothing to do with it, eh?

Nice try, but the truth is slowly coming out, and it will be all out before the election.

rubenh ( said...

know your history or be forced to repeat it