Via America’s Lawyer: RT Correspondent Brigida Santos joins Mike Papantonio to explain how amendments to the Volcker Rule will allow big banks to resume the kind of risky investments which led to the 2008 financial crash.
*This transcript was generated by a third-party transcription software company, so please excuse any typos.
Mike Papantonio: Bank stocks are surging now that the federal reserve and other regulators have finalized an amendment to the Volcker rule, the rule was implemented in the aftermath of the 2008 financial disaster to protect bank customers. RT’s Brigida Santos joins me now to talk about that story. Brigida, this is deja VU, right? I mean, you know, did we not learn anything? Have people forgotten that the banks led us to the edge of the abyss and right into the center of the abyss. For those who don’t remember what the Volcker rule, Volcker rule is, tell us about it.
Brigida Santos: Well, the Volcker rule was approved in 2013 to prevent banks from engaging in risky investments with their own funds, which is what led to the 2007, 2008 global financial crisis. It also barred banks from sponsoring or owning hedge funds and private equity firms. The rule can also be found under section 619 of the Dodd-Frank wall street reform and consumer protection act, which imposed comprehensive regulations on financial markets and established new government agencies, including the consumer financial protection bureau. But under president Trump, Dodd-Frank regulations have been slowly rolled back over claims that they make the US less competitive than their foreign counterparts.
Mike Papantonio: Okay. So here we have a situation where we know, we’ve already seen the history. We’ve seen what happens when banks are allowed to go to Vegas. That’s the term. They, they go to Las Vegas. Basically they go to Las Vegas with, with taxpayer money, because we have to bail them out, right? They go to Vegas with mom and pop money who have everything counting on that bank doing, you know, being able to stay alive. And so they, they simply take these risks because of one reason, people at the top management want to make as much money as they can and to hell with everybody else. That’s their, that’s their attitude. So the Volcker rule is put there to fix it. How might this new amendment impact the public, Brigida?
Brigida Santos: Well, the banks and the people with a lot to gain on wall street are going to see this as a win. They love it, while critics down on main street see these rollbacks as more evidence that the US is a plutocracy. You know, average and poor Americans are still struggling with the consequences of an unprecedented economic crisis due to the COVID-19 pandemic. Meanwhile, the rich keep getting richer because they have better lobbyists. Wall street interests have long sought to weaken the Volcker rule and when these changes take effect on October 1st, it’s going to be a lot easier for banks to make risky investments in venture capital funds that don’t benefit customers, yet generate profits for themselves. Without oversight, as you said, history could absolutely repeat itself since these activities are what led to the crash of 2008, which let me remind you was the worst economic disaster since 1929. This decision could jeopardize the entire financial system, which is already teetering on the edge due to the economic consequences of the pandemic. As you said, they’re going to the casino, but unfortunately they are the house. So it’s not great for everybody else, but it’s great for them.
Mike Papantonio: Yeah, so the, the, the federal reserve has purchased corporate debt for the first time. This is very significant. They purchased corporate debt for the first time ever as part of the response to the coronavirus. And, and you can’t avoid the question and, and if you’re in the market, you need to take the very seriously. Is this the next bubble? Do we have these, do we have these same thuggish predator bankers looking for a quick fix? Where they make billions of dollars, build their mansions, buy their yachts, buy their jets and then everything goes belly up and they don’t, they don’t go to jail. They don’t have to give anything back. Life as usual. What’s your call?
Brigida Santos: Yeah. Companies have amassed record amounts of debt during the pandemic due to stay at home and social distancing orders. The entire supply chain has been affected by this and in response, the fed began buying individual corporate bonds and corporate bond ETFs aimed at restoring liquidity to credit markets. Now the central bank says it plans to buy debt from nearly 800 companies, while some of these businesses are absolutely struggling due to the pandemic, others are not including Walmart, Coca-Cola, AT&T and McDonald’s to name a few. And prior to the pandemic in 2019, companies were already borrowing far more money than they could ever pay back. In fact, last year, corporate debt hit nearly $10 trillion. That’s a record 47% of the economy. Now the fed is trying to clean up a mess that has only gotten worse during the pandemic, but started a long time ago. And experts now worry that if the fed keeps flooding the market with emergency bond purchases, the central bank could end up creating the greatest financial bubble in history. And again, it’s not going to matter to them because they’re going to get those bailouts.
Mike Papantonio: You want to have some fun, go on the internet and check out how many billionaires were created out of the 2008 burn down by banks by this, this corrupt conduct. They all were billionaires. They left mom and pop out to dry, and then taxpayers had to end up paying for their jets and their mansions and their yachts. But today nothing’s changed. They live in those same mansions. They drive those same, you know, jets. They drive the same yachts. Nothing changed. Nobody went to prison. So, hey, what the heck, why not try it again? Brigida, thanks for joining me. Okay.
Brigida Santos: Thanks Mike.