Thom Hartmann: On the line with us, one of my favorite legislators, I think one of the genuinely honest men in Washington DC, congressman Peter DeFazio of my state of Oregon, representing the 4th district here. Congressman DeFazio, welcome to the program.
Peter DeFazio: Thanks Thom.
Thom Hartmann: Or welcome back, it’s always great talking with you. I wanted to get you on specifically because you and five other members of congress have introduced or threatened to introduce legislation to bring back Glass-Steagall to separate gambling banking, investment banking from old fashioned commercial banking, let me give you a mortgage for your home, let me finance, you know, let me give you a loan to run your business kind of banking, and take our savings account banking. How can anybody think that this is anything other than common sense?
Peter DeFazio: Ha. Well I don’t know, I mean there are a few people around here that would have to eat crow who voted to do away with Glass-Steagall who are still serving in Congress.
Thom Hartmann: And Lawrence Summers was one of the big proponents of blowing up Glass-Steagall.
Peter DeFazio: Oh, absolutely, it was part Rubinomics, the Clinton era, and they were hand in glove and Larry Summers was their henchman in this whole activity. But I voted against the repeal. It didn’t make sense to me that we would allow regulated banks with insured deposits to get involved in gambling or insurance and basically if you want to know the poster child for doing away with Glass-Steagall that would be AIG or it’d be Citigroup, two of the biggest bail out recipients from the TARP funds and other treasury funds. It’s been a disaster. We need to create a wall. I don’t care if these people want, if they stay small enough that they can’t create systemic risk. If they want to go out and gamble with other people’s money, that’s investors money, that’s fine. But not with depositor's money. And we have a dysfunctional system now. Wells Fargo isn’t lending to the real economy, putting people back to work, they made all their money last quarter, according to their own statements, in gambling.
Thom Hartmann: In other words, it’s called proprietary trading, where they’re trading money that they’ve borrowed from the Fed presumably.
Peter DeFazio: At no cost to them.
Thom Hartmann: Yeah, right. And they’re trading and making a profit on their trades. And then paying huge commissions and bonuses to their traders.
Peter DeFazio: And then stiffing real businesses in my district that are liquid, some in the timber industry, privately held, very low debt who want to use this downtime to upgrade their equipment and saying, 'oh, sorry we don’t do your line of credit anymore'. So they’re not lending to the real economy.
Thom Hartmann: Yeah, absolutely. And let me just try to describe this in real layman's English. And you can do a reality check on me, congressman Peter DeFazio, if I’ve got this right. There’s basically two kinds of banking out there. There’s the old fashioned bank that we all grew up with, at least those of us of a certain age, where you put savings into the, you put your money into the bank and you can have a checking account or a savings account, if you have a savings account there the bank considers that, or if you keep a big float on your checking account, the bank considers that deposits. A multiple of that they can loan out to other people to buy houses or to businesses to finance their businesses and they make their money on the spread between the interest. They pay me 2% on my savings account and I have to pay them 5% on my mortgage and their profit is the 3% difference between the two. And that’s all they do. That’s called banking.
And then there’s another kind of institution that says, 'oh, you got a million bucks and you want to turn it into 2 million bucks? Give it to us and we’ll figure out what to do. And we’ll have some of our guys put some of it into money market funds and we’ll put some of it into Australian dollars and we’ll put some of it into gold mines and we’ll put some of it into', whatever. And that’s called investment banking or gambling. And Glass-Steagall from 1933 until 1999 made illegal for a bank to do both. They had to decide which kind of bank they wanted to be. And now banks, since 1999, banks have been allowed to do both, and so the banks that are holding our checking accounts and our mortgages have also been gambling on the side and the gambling brought them down. But by bringing them down they’re bringing down their ability to hold our checking accounts, it’s putting that at risk, and hold our mortgages. Do I have this right?
Peter DeFazio: Yeah, and of course there’s federal insurance involved and remember as some of them, there are some minimal restrictions on these combined banks, and even that was to much for some, like Goldman Sachs and others, who remember, stayed investment banks until they were bankrupt. And then when they wanted to get bailed out they became bank holding companies which means that they’re now subject to this miniscule amount of regulation as opposed to total free wheeling gambling. I mean, now they’re required to keep some. But I understand Goldman got a special license. Even though they’re a bank holding company, they don’t have to meet the minimum reserve requirements because they’re gamblers.
Thom Hartmann: Jeez. And it’s…
Peter DeFazio: It’s pathetic. The amount of money we’re shovelling into these people and they’re just arbitrizing it, leveraging it or gambling it and now they think they’re too big to fail so what the heck. If they screw up again they’ll just come back for more.
Thom Hartmann: Yeah well the problem is if my bank that is holding my checking account and my mortgage crashes because they gambled on the side, my, you know, I’m at risk. On the other hand if the millionaires bank that is gambling crashes, the only people who are going to lose money are the investors, the millionaires, or whatever. The pension funds or…
Peter DeFazio: But they didn’t. I mean, yeah, stockholders and pension funds did lose money but a lot of gamblers didn’t lose money because of the bail outs. Remember in some of these bailouts you know everybody except stockholders was made good. So the wealthy people or investment banks who had bonds got paid back 100%. In the case of AIG Goldman Sachs got paid 100% on their bets. You know, thanks to secretary Geithner. So, you know, the deck is very much stacked against the real economy and very much in favor of what is in favor with this administration and unfortunately the last two, which is you know, the financial sector, as though that they create wealth. They don’t create wealth, they mirror wealth that is created by the real society. But there’s now there’s these people who think that somehow by gambling they’re creating wealth and unfortunately they have strong support in the economic team of this President.
Thom Hartmann: Yeah, and this is something that really went on steroids during the Clinton administration. I mean, let’s be honest about it. During a democratic administration with a democratic congress, for six years of that administration. And …
Peter DeFazio: No, we only had a democratic congress for like 2 years of that administration, in the house.
Thom Hartmann: Okay, thank you.
Peter DeFazio: We got wiped out in ’94 thanks to Bill Clinton, NAFTA and a bunch of other things he did.
Thom Hartmann: Yeah absolutely, you’re right. The "Pay Czar Caves On AIG Pay, Lifts $500,000 Salary Limit". To put it bluntly, the threats worked. This …
Peter DeFazio: You can’t get good help for what he’s talking about, come on!
Thom Hartmann: Yeah, you can’t get…
Peter DeFazio: There’s no one out there who would do that job for…
Thom Hartmann: For less than a half a million. Yeah, okay, that’s what it comes down to. Congressman Peter DeFazio, what do you think the possibilities are that, let me rephrase this. Bernie Sanders, Senator Bernie Sanders made the comment on this program a while back that it seemed to him that the banksters, that my phrase, not his, that the financial services industries were the ones who were the heaviest donors to most campaigns and had the most political power when it came to lobbying in Washington DC. Assuming that that’s true or close to true, what are the possibilities of even a minimal change like what you’re suggesting, giving banks one year to decide whether they want to be investment banks or commercial banks and reinstituting Glass-Steagall. What are the possibilities of these reforms happening and if these reforms don’t happen, it sure seems to me like in the next, I don’t know, 24 months at the most, we’re gonna have another big crash. How do you think this is gonna play out?
Peter DeFazio: Well they’ve unleashed, as I understand it, 1500 lobbyists on Capitol Hill these last few weeks. That is 3 lobbyists for every member of congress. Now I don’t really know that firsthand because they haven’t been in to see me. But I understand…
Thom Hartmann: Yeah, what a surprise.
Peter DeFazio: So that means, well you know there’s more than three out there, because they don’t have to bother with me, who are teaming up on somebody else. They’ve lined up a whole host of hostile amendments to what I consider to be minimum, minimum reform which is what we’re considering now. I mean the Consumer Finance Protection Agency is a good step but they’re gonna try and gut that by saying that it won’t, you know, that it would preempt higher state laws for consumer protection. They’ve got a number of hostile amendments lined up to make the bill worse, let alone amendments like we’re offering on too big to fail, on Glass-Steagall, and and on shadow markets. That is all the hedge funds and private equity and trying to bring them into the light. And then of course, I would assume they’re gonna attack the 'audit the Fed' language, but they’re gonna have a hard time with that because that’s caught on on both sides of the aisle. I think we’re gonna finally open up the Fed a little bit. I mean people deserve to know what sorts of multi-trillion dollar obligations have been made in our name by Mister Bernanke and his private banking cohorts who compose the Federal Reserve. Most people don’t realize it’s really a private organization.
Thom Hartmann: Right, it’s not even, it’s not federal and it has no reserves.
Peter DeFazio: Right. It does have a computer on which it can create money.
Thom Hartmann: Yes. And they’ve created apparently somewhere between 4 and 7 trillion dollars that they are not, they’re refusing to tell congress where the money went?
Peter DeFazio: Yep. P trillion and w’ere not allowed to know.
Thom Hartmann: Yeah, it’s pretty grim stuff. Congressman DeFazio, in 20 seconds, what should the average, what should our listeners do?
Peter DeFazio: Well, they should express their outrage. They should call, call the house. Call their representatives, jam the switch board and say, 'look, we want the strongest possible reform, this has been way too long in coming, this should have been one of the first bills you took up last February, you know, what you’ve got here is minimal, make it stronger in the floor amendments, don’t water it down, and pass it'.
Thom Hartmann: Yeah. Stop listening to the banksters.
Peter DeFazio: That’s right. We need to… Let’s see if there’s 3 lobbyists on every member of congress, we need 3000 phone calls.
Thom Hartmann: There you go. Congressman Peter DeFazio, democrat from the 4th district of Oregon, and a good guy, definitely a good guy. Congressman, thanks so much for being with us.
Peter DeFazio: Thank you Thom.
Thom Hartmann: Great talking with ya, as always.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.
