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MASKING SAVES LIVES

Monday, November 24, 2008

"The Rise and Fall of Citigroup" -- Pam Martens

And if you want to know who Pam Martens is, read the whole article and see her amazing prescient speech to the Fed in 1998.

Portion below; whole thing here: http://www.counterpunch.org/martens11242008.html

It took the repeal of the Glass-Steagall Act, legislation crafted after the 1929 crash barring commercial banks from merging with their casino cousins (investment banks and brokerage firms) to bring Citigroup to life.

Sandy Weill took Travelers Insurance, the Smith Barney brokerage firm (which had been combined with the Shearson brokerage firm), the investment bank Salomon Brothers and announced on April 6, 1998 that he would be merging all of these units with the commercial banking giant, Citicorp, owner of Citibank. Never one to let laws get in his way, Mr. Weill announced this deal despite the fact that this combination was not allowed at the time because of the Glass-Steagall Act.

It would take “a village” in the Clinton administration to get Glass-Steagall repealed and allow the creation of the colossal financial monster that would take precisely one decade to pay its founder $1 billion and then implode in a sea of losses. The village included Treasury Secretary Robert Rubin who successfully lobbied for the repeal of the investor-protection law, then left his cabinet position in the Clinton administration and moved his game marker to the Board of Citigroup 17 days before the bill gutting Glass-Steagall was signed into law on November 12, 1999. Mr. Rubin would collect over $150 million from Citigroup in the next 9 years for his Board service, without ever drawing the go-to-jail card; not even when he picked up the phone and called a Treasury official and asked the government to stop the credit rating agencies from downgrading the debt of Enron, to whom Citigroup had major exposure. In that one instance, he was rebuffed.

And, of course, the village included Alan Greenspan who rarely saw an investor-protection regulation to which he didn’t proceed to take a machete. Now, after 19 years of making the country listen to his mutterings before Congress in verbose, convoluted academic-speak; after he has assisted handily in turning Wall Street into the Dollar Store and once thriving companies into a barren wasteland of receiverships, bankruptcies and collapsing stock prices, he offers a broken country a one-liner: he got it wrong.

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