On the heels of Italy’s Lega Nord party launching a mobilization for Glass-Steagall to be introduced in the House of Delegates (it was recently introduced in the Senate), it has immediately been hit with police raids and financial charges, etc. The timing is an unmistakeable “Britannia crowd” response to the uprising against EC/IMF austerity and for national credit. Lega Nord and a small leftist party are the only parliamentary opponents of the Monti fiscal dictatorship imposed from London and Brussels. Local elections are coming up, in which broad gains for Lega Nord are feared by the British crowd.
Despite the attack, Lega has booktables up around the north of the country organizing around a Glass-Steagall petition and other economic planks. It is planning an April 21 national conference on this mobilization.
Their petition reads as follows: Proposed Bill of Law
BY POPULAR INITIATIVE PURSUANT TO ARTICLE 71(2) OF THE ITALIAN CONSTITUTION AND IN APPLICATION OF LAW NO. 352 OF MAY 25, 1970 AND SUBSEQUENT AMENDMENTS
(Guarantee of credit for families and enterprises: separation between productive credit and speculative financial activities)
Two centuries ago, Thomas Jefferson said: “I believe that banking institutions are more dangerous to our liberties than standing armies” (1816). Today, the situation is more or less the same, and so the time has come to put the State above finance, and finance below the State; to set a limit to the excessive power of finance. To finally do this, means to put an end to a twenty-year cycle of unnatural supremacy of particular interests over general interests, it means “driving the money changers from the Temple,” conquering the spell of power still exercised by the high priests of money.
To do this means that it is only the State that issues money in the name of the people. It means that credit is for development and not for speculation. It means separating “the wheat from the chaff,” what is productive from what is speculative, as happened for centuries. It means beginning to defend and stabilize public budgets, and in general to begin a different economic and social system, that is not only more ethical, but also more effective than the monetarist system that is currently coming down and unfortunately, is taking us with it – if we don’t resist, if we don’t react, if we don’t change.
We repeat: the time has come to re-establish the proper balance between the power of finance and States, between finance, constituting its own interests, and political institutions, that are charged with representing the general interest of the public. Even in the worst-case scenario that we could imagine for politics, it is still true that, no matter how questionable a policy may seem, a questionable policy is still better than invincible finance. Indeed it has been said that democracy can be the worst of systems, but we don’t know any better (Winston Churchill). Well, financial autocracy is also not better than democracy!
The various situations that we see today in the financial and banking field are truly very differentiated, both at the national and European levels, and beyond. Thus, we can not plan only a single measure, a single instrument to be applied. Yet there is a common political logic to act as the base for each necessary intervention. In some cases, it is necessary to make the banks that are or call themselves systemic, less systemic, or not systemic at all: reduce their size, split them up, weaken them, because the time has come for the separation of banks that collect deposits and capital and invest them at their own risk in large industries, small enterprises, for families, communities and youth, and the banks that gamble, that privatize their winnings, and socialize their losses. In this manner, they also produce a result that is contrary to any form of capitalist efficiency, as debatable as it may be. So banks must return to their role, to be considered and treated, as an infrastructure at the service of the economy and society; not the other way around.
In other cases, banks must be nationalized, before their ruin makes it necessary to do so later, potentially at the public’s expense. First, we repeat, we must separate “the wheat from the chaff,” the good from the bad; open and force the opening of the accounts, impose voluntary or compulsory audits of how much of the one and the other there is in each bank, and in each large financial entity more in general. Specifically, the healthy assets and liabilities must be separated from the toxic ones, that are to be sequestered. There are various techniques available for such a sequester, that are both ancient and very modern at the same time: from a sabbatical to a moratorium, to a bad bank. It is clear however, that in any event the enormous toxic financial mass, that still exists in the so-called system, must be spread over the longest periods possible and saddled on the speculators, or just written off. A gambler cannot simply leave the table and have someone else take his place to pay for his losses. The one who loses a bet must be forced to pay!
We must block the infection that originated in finance, and now, out of control, is spreading elsewhere.
Many entities, sectors, banking and financial groupings must go through orderly bankruptcy procedures. For example, procedures based on the model of Chapter 11 bankruptcy in the United States. We can not pretend that everything will be saved, especially when experience tells us that when you try to save everything, you end up saving worst parts.
At the time of the New Deal, starting in 1933, first new rules were introduced and the banking and financial system was reorganized, isolating the system from parasitical activity, and then public monies were used for public investment, in infrastructure, to save families and industries. (There is more on this type of investment below) Incidentally, it is important to remember that only the saving of the U.S. industrial apparatus, as carried out, allowed for defeating the Nazis.
Starting in 2008, however, the opposite took place: public money was used predominantly to save banks and bankers; new rules were not made (quite the opposite); there are no serious, large-scale public investment projects for the industrial, physical and manufacturing economy, or for infrastructure.
The absolute priority now is survival (primum vivere). Abandon the model of the so-called ‘universal bank,’ that is the DNA of systemic banks, the launching pad for the disastrous global megabank. To do this it is necessary to introduce a new, updated version of the Glass-Steagall Act of 1933.
In short, now as then, it is necessary to set up a firewall, to distinguish between ordinary banks and gambling banks, so that ordinary banks can no longer lend the money from their account holders to the gambling banks, or buy their structured products. This distinction can and must be made instantaneously, abrogating the new laws, introduced more or less everywhere in the nineties, and returning to the old laws from the thirties. This is exactly what needs to be done.
It’s true that enormous profits can be made by speculating with the money deposited in banks by ordinary account holders. This is exactly what needs to be prevented. The funds of ordinary account holders, first, and the taxpayers, second, must no longer be subject to this type of risk; a risk that is now expanding to public accounts, and moving up the stairway of the crisis, affecting the well-being and life of peoples.
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