On Monday, Hillary unveiled her economic agenda for strengthening the middle class. But looking at solutions like raising the minimum wage is only half the story. To evaluate the bigger picture, a review of Hillary's history with the banking industry is necessary.
Remember taxpayers bailed out the banks in 2008 to keep the economy from crashing? Remember the deregulation of derivatives with the Commodity Futures Modernization Act in 2000? Thanks to Congress neutering Dodd Frank regulations that were meant to reinstate sane checks and balances on the financial industry, our economy can be expected to go through a rough roller coaster ride for the next President. Banks and speculators have not stopped the types of behaviors that would cause another financial disaster. As the Financial Crisis Inquiry Commission warned in their February 2011 report explaining the 2008 crash:
"More than 30 years of deregulation and reliance on self-regulation by financial institutions...has stripped away key safeguards, which could have helped avoid catastrophe."
Those key safeguards are still not reinstated. As proof that banks know a bailout seems imminent, Citigroup wrote their own bailout scenario into the 11th-hour government funding bill that passed December, 2012. Citigroup lobbyists made sure Congress passed a specially designed provision to override the "push out rule" of Dodd Frank which required risky derivatives to go through non-bank affiliates that aren't insured by the FDIC. This last-minute addendum puts the government on the hook yet again when their trading practices threaten to make Citigroup insolvent. We Americans have every right to be angry at this kind of socialism-the kind where government gives "social welfare" to banks.
I don't think Hillary is prepared to handle the onslaught of a financial crisis, and I'll explain this assertion in two words-campaign contributions.
Husband Bill Clinton gleefully deregulated the banking industry by signing the Financial Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000. The first Act dismantled the regulations that had kept our economy stable since after the Great Depression (Glass Steagall) and the second made sure that derivatives were traded secretly.
To undo this mess, Hillary would have to specifically address the banking industry insiders--the same people who have been promoting and paying for her campaign.
Hillary's donors are a who's who of banks and financial institutions. According to OpenSecrets.org, Citigroup, Inc., Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Lehman Brothers were five of her top ten supporters between 1999 and 2014.
In The System Worked, author Daniel Drezden writes of the Dodd Frank reforms and bailouts: "The more that people realize the system worked after 2008, the more likely they are to believe the system will continue to work in the future." So what if we bail out the banks? Many of my friends thought Obama averted catastrophe by giving banks enough money to stay solvent. Better than having them fail, right? Not necessarily. Borrowing money from the Fed and giving money to irresponsible banks makes our government look like it's printing play money, and other countries don't like that. The BRICS countries (Brazil, Russia, India, China and South Africa) are setting up their own reserve currency paradigm. In the event that the US dollar loses its cache as the world's reserve currency, other countries are prepared to smooth out market volatility by having their own currency pool.
Unregulated derivatives are the biggest bubble yet. Just as we had no clue about the blowback from detonating the first nuclear bomb to take out human lives, we have no idea how this meltdown will play out. When the derivatives unravel this time, instead of relying on $1.3 trillion from the Fed and $700 billion from taxpayers as they did in 2008 and 2009, it will be much, much more. The International Bank of Settlements has reported that the notional value of derivatives is over $600 trillion. That's a lot of balls to keep in the air. If traders can't keep moving this fantastical amount of money around, their bubble bursts all over us.
Will Hillary bail out her banking friends who are helping her run for President? Or will she do what is necessary to bring back stability to our economy?
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