From Wall Street on Parade, by Pam Martens and Russ Martens
Last Wednesday Janet Yellen, the Chair of the Federal Reserve (the central bank of the United States) regurgitated the notoriously fake information that has been spewing from columnists at the New York Times since 2012 on the causes of the epic Wall Street financial crash of 2007 to 2010.
Yellen was taking questions during her press conference on the Fed’s announcement of a rate hike. John Heltman, a reporter for American Banker, posed the following question to Yellen:
Heltman: “The administration recently reiterated its support for reinstatement of Glass-Steagall. Treasury Secretary Mnuchin has called for a 21st Century Glass-Steagall. Keeping in mind that there’s no specifics on this proposal, is the fundamental idea of separating commercial banking from investment banking a fruitful line of inquiry. Is this the right path to be pursuing?”
Yellen answered as follows:
Yellen: “So, I’ve not seen any concrete proposals along this line. I don’t really know what a 21st Century Glass-Steagall would look like. I think my reading on the financial crisis is that wasn’t the major source of the financial crisis, in fact many of the problems emanated from firms that were investment banking units. To me, an important reform in the aftermath of the crisis was to make sure that investment banking activities that were a core part of the shadow banking system where leverage had built, that those were appropriately capitalized, had appropriate liquidity and their management was strengthened and that’s what we have tried to do. But obviously we would look at any proposals that are put forward. I’m not aware of anything concrete to react to.”
Notice what Yellen doesn’t say. She doesn’t say that an official research report that has investigated the cause of the Wall Street crash finds no evidence that it was related to the repeal of Glass-Steagall. She doesn’t say that the books written by the regulatory insiders of that period found that repealing Glass-Steagall had nothing to do with the crash. All that she says is this: “my reading on the financial crisis is that wasn’t the major source of the financial crisis, in fact many of the problems emanated from firms that were investment banking units.”
Yellen’s “reading” has clearly been coming from New York Times columnists who have demonstrated an inexplicable fealty to pumping out notoriously fake facts about the repeal of the Glass-Steagall Act while the publisher, managing editor and public editor of the New York Times have refused to correct those fake facts.
The Glass-Steagall Act was the depression era legislation that protected this nation’s financial system for 66 years until its repeal in 1999. It took just 9 years after its repeal for the system to crash in a replay of the 1929 to 1932 epic financial crash – the other period when there was no Glass-Steagall Act. The legislation barred investment banks and brokerage firms that engaged in underwriting and the peddling of stocks to merge with commercial banks holding Federally-insured deposits that are backstopped by the U.S. taxpayer. The common sense objective was to prevent the greed and speculative forces that regularly blow up investment banks on Wall Street from taking down a bank holding the insured life savings of moms and pops across America – thus putting the U.S. taxpayer on the hook for the losses.
The big propaganda push at the New York Times started on May 21, 2012 when the Times published an article by Andrew Ross Sorkin that had so many critical errors that it should have become an historic embarrassment to the New York Times. Instead, the New York Times simply refused to correct the multitude of errors, despite many written requests from Wall Street On Parade.
The point of Sorkin’s article was to create the narrative that the repeal of Glass-Steagall could not have prevented the financial crash in 2007-2010 because the major investment banks that failed spectacularly did not own commercial banks holding insured deposits. The problem for Sorkin was that the major investment banks he named in his article did, indeed, own insured commercial banks holding billions of dollars in insured deposits and thus could not be allowed to fail.
By October of the same year, the President of the United States, Barack Obama, was regurgitating to the nation’s air waves the alternative facts put forth by Andrew Ross Sorkin and the New York Times. (Read our in-depth report.)
Sorkin had become quite chummy with the CEOs on Wall Street. When he published his book, “Too Big to Fail,” in 2009, a book party was held in Manhattan. Clearly pleased with the narrative Sorkin had created in his book on the crash, the following Wall Street luminaries attended: Jamie Dimon, Chairman and CEO of JPMorgan Chase; Ken Griffin, CEO of Citadel; Bill Ackman of Pershing Square; David Rubenstein of the Carlyle Group; and pretty much the top suite of Morgan Stanley, including John Mack, Chairman and CEO, and Colm Kelleher, the CFO.
The Federal Reserve is the top regulator of the most dangerous bank holding companies in the United States — bank holding companies that have yet to be meaningfully reformed. If Fed Chair Yellen’s “reading” on the financial crash derives from reading the New York Times’ fake facts, we’re all in big trouble.