John Reed Support A New Glass-Steagall Act

Former Citigroup CEO John Reed told the Financial Times that the repeal of Glass-Steagall helped caused the crash of 2008. Reed said high risk investments puts the commercial divisions of major banks at risk.

“As trading becomes more important then it becomes harder and harder to keep those cultures separated. And it began to work into the risk-taking culture as well. [In the past] risk officers would say to someone who wanted to make a loan: ‘I don’t like this credit. We aren’t going to do it. Stop. Period.’”

“But now they would recognise that if a certain transaction didn’t go through, his colleague wasn’t going to be paid that year. It became very difficult to say: ‘Sorry. Don’t do it.’ Your colleague was being compensated for doing transactions, not just being at work. It became infectious.”

Reed doesn't buy the arguments anti-regulation fundamentalists. Reed thinks a new Glass-Steagall Act would not overburden banks.

“I think it could absolutely be done. The finance industry is amazingly flexible. We don’t have big, fixed capital bases. It’s not like we have factories that need to be re-engineered.”

Reed told Bill Moyers that he is amazed Congress still listens to the too big to fail banks.

“I’m quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did… And then the whole system came down.”

Congress and the Obama administration listen to the big banks because of campaign contributions. Most members of Congress are economic illiterates. They couldn't tell you that the Glass-Steagall Act separated commercial and investment banks.

Moyer's interview with John Reed.

Meet the Obama Financial Sector Donors

Obama supporters wonder why I am so skeptical about the President. The reason is that every domestic policy that President Obama has initiated has been to please lobbyists. Obama doesn't give a damn about progressive causes. A perfect example of how Obama places the needs of corporate donors above his constituents. A 2010 meeting with Sen. Bernie Sanders is proof that Obama values protecting corporate profits more than cunsumers.

Last summer, during a White House meeting with first-term Democrats, Sen. Bernie Sanders, an independent from Vermont, asked Obama whether he'd nominate Warren for the role.

Obama held up a half-full glass of water and told him: "That's the problem with you progressives. You see this as half-empty.

It turns out that Obama never nominated progressive darling Warren. It is hard to imagine a President whom received $1,013,091 from Goldman Sachs, $808,799 from JPMorgan Chase, and $736,771 from Citigroup would see eye to eye with Warren on financial policy. The last thing Obama wants to do his have Warren reform Wall Street.

Obama supporters will say look what the president has done for the gay community. In 2009, the Obama administration pressured Rep. Alcee Hastings to drop an amendment that would repeal "Don't Ask, Don't Tell. Democrats had super-majorities in both houses of Congress. Yet, Obama didn't want to touch DADT. The gay community started raising a record amount of money for Obama. The President had a sudden change in heart on DADT.

Obama proposed Medicare cuts that made even some Republicans flinch during the debt ceiling negotiations. Obama is as much a deficit peacock as the Republicans. Obama gave PhRMA lobbyist Billy Tauzin everything he wanted. Including Medicare being prohibited from negociating lower drug prices with pharmaceutical companies. Obama wasn't thinking about the deficit or controlling entitlement spending when he made that deal. It is no coincidence that drug companies donated big-time to Obama's 2008 campaign.

If you want to understand Obama, all you need to do is follow the money.

The Credit Lending Crisis

This is a good indication of how serious the credit lending crisis is.

AMERICA's four biggest banks have announced they have each borrowed $US500 million ($613 million) from the Federal Reserve, taking an unusual step to ease the credit squeeze that has been rattling the financial system for weeks.

The banks - Citigroup, Bank of America, JPMorganChase and Wachovia - said on Wednesday that they had tapped the so-called discount window of the Federal Reserve Bank of New York, five days after the central bank lowered the rate and loosened its collateral requirements in an effort to inject more money into the credit markets.

The Federal Reserve cut the interest rate, it charge to banks, from 6.25 to 5.75. The banks helped created this problem by spending $300 billion in online advertising to sell mortgages. They sold mortgages to many people whom shouldn't have been approved. Noble Prize-winning economist Edmund Phelp commented on the lack of oversight.

"It seems to me that markets were not equipped with the adequate new instruments, the necessary institutions to administer these new credit markets."

What made matters worse is the housing market bubble finally popped. The top 5 U.S. homebuilders lost $1.85 billion in the third quarter.

In other news: President Bush said the economy is "strong."