(This is the last of a five-part series)
The diagram you see above is just a sketch of how power and influence are exchanged in Washington. The exchanges are explained in parts 2-4 in this series, in which iron triangles of power are illustrated. This diagram shows only bilateral relationships that indirectly add up to a power establishment.
The diagram doesn’t show interlocking directorates among businesses and banks or the blurring of distinctions between commercial banks and investment banks. It doesn’t show the investments that individual congressmen or individuals elsewhere on the diagram have in others in the diagram.
As a precaution against tendencies toward monopoly, federal law prohibits banks in the same city from having interlocking directorates. That law was passed in the days of green eye shades and paper ledgers. In the age of Internet and Excel, all banks are virtually in the same city.
In 1933, Congress wisely passed the Glass-Seagall Act, separating commercial banks, investment banks, and insurance companies. For the next 66 years, the Glass-Seagall Act served as a deterrent to some of the worst abuses that had led to the Great Depression. Insurance company representatives could proudly claim that no insurance company in American history ever went bankrupt.
Then, on November 12, 1999, the curtain rang down on sanity and then came Act Two. The ironically titled Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act (or more formally, (Pub.L. 106-102, 113 Stat. 1338) was passed. Phil Gramm now holds the dubious distinction of being the Father of the Current Financial Crisis.
None of these three perps are still at the scene of the crime. Leach and Bliley dropped out of sight, and Phil Gramm became a lobbyist for malefactors of great wealth. Astonishingly, Gramm was 2008 presidential candidate John McCain’s chief economics adviser. McCain admitted that he didn’t know much about economics, but that was ridiculous. It’s like admitting that you don’t know much about surgery and asking Jack the Ripper to perform an operation on you.
Phil Gramm also holds the dubious distinction of ending insurance company bragging rights about never having experienced bankruptcy. Courtesy of the Gramm-Leach-Bliley Act, American International Group (AIG) became heavily involved in credit default swaps and collateralized debt obligations. (Don’t feel embarrassed for not understanding those terms. Fed Chairman Allan Greenspan admitted that he didn’t understand them either but that they must be good for the economy. In 2008, Greenspan was the one who ended up feeling stupid. When McCain picked Gramm to advise him, McCain really was stupid.) Courtesy of Phil Gramm and his unindicted co-conspirators, AIG became the first insurance company in American history to be nationalized to save it from going bankrupt.
You may be wondering if the wheeler dealers in Washington are at least as sophisticated as the average teenage Facebook user. That is, do they, like their pimpled counterparts in cyberspace, do networking or participate in meet-up groups? Well, yes, they have several of them. That’s another phenomenon that the diagrams in this series don’t show; and that will be the subject of a future article.
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