PRISM Schism

Heads or Tails?

– By: Larry Walker II –

Carla Dean: “Well, who’s gonna monitor the monitors of the monitors?” – Quotes from Enemy of the State

PRISM is allegedly a covert collaboration between the NSA, FBI, and nearly every tech company you rely on daily. PRISM has allegedly allowed the government unprecedented access to your personal information for at least the last six years. I say allegedly because every tech company in question denies its existence.

According to the Washington Post:

The National Security Agency and the FBI are tapping directly into the central servers of nine leading U.S. Internet companies, extracting audio and video chats, photographs, e-mails, documents, and connection logs that enable analysts to track foreign targets… Equally unusual is the way the NSA extracts what it wants, according to the document: “Collection directly from the servers of these U.S. Service Providers: Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube, Apple.”

However, Apple, Microsoft, Yahoo, and Google have all given full-throated denials of any involvement whatsoever. According to Google (emphasis mine):

You may be aware of press reports alleging that Internet companies have joined a secret U.S. government program called PRISM to give the National Security Agency direct access to our servers. As Google’s CEO and Chief Legal Officer, we wanted you to have the facts.

First, we have not joined any program that would give the U.S. government—or any other government—direct access to our servers. Indeed, the U.S. government does not have direct access or a “back door” to the information stored in our data centers. We had not heard of a program called PRISM until yesterday.

Second, we provide user data to governments only in accordance with the law. Our legal team reviews each and every request, and frequently pushes back when requests are overly broad or don’t follow the correct process. Press reports that suggest that Google is providing open-ended access to our users’ data are false, period. Until this week’s reports, we had never heard of the broad type of order that Verizon received—an order that appears to have required them to hand over millions of users’ call records. We were very surprised to learn that such broad orders exist. Any suggestion that Google is disclosing information about our users’ Internet activity on such a scale is completely false.


Now we hear that the federal government may be launching an investigation in order to find the person who leaked details regarding PRISM to The Guardian and Washington Post newspapers. In other words, the government wants to know who, within its ranks, blew the whistle. Sounds like another government-manufactured conundrum to me.

Great, so now the government is going to waste time and resources finding out who leaked the details of a program which never existed. Seems to me like the White House would be a great place to start, especially since its Deputy National Security Adviser, Ben Rhodes, has a master’s degree in fiction-writing from New York University. What’s up with that? I mean, in the mind of a fiction writer, wouldn’t it seem like one of the best ways to deal with a series of scandals would be to manufacture an even bigger one, and then quash it?

By that time won’t everyone have forgotten about Benghazi, the IRS Scandal, James Rosen, Eric Holder, Verizon, the Budget Crisis, Illegal Immigration, the Secret Kill List, Obamacare and everything else? Well, not in the real world. Nevertheless, for my two cents, if there is a leak investigation, in an effort to save both time and precious taxpayer resources, it should be performed by a Special Prosecutor, and should begin and end at 1600 Pennsylvania Avenue.



I’ve actually known about Comverse Technology, Inc. since around 1994. The company merged with Verint Systems, Inc. early this year. This video discusses how the Verint Communications and Cyber Intelligence products and solutions help make the world a safer place (i.e. a less private place).

Verint CIS Solutions from Verint on Vimeo.

Progressive Regression II | Financial Regulation Crisis

– By: Larry Walker, Jr. –

Government Regulation vs. Self-Regulation

Once again, the Progressive Obama Administration’s magical solution, for all problems American, is more government regulation. But is government regulation really any better than self-regulation? Progressive government regulation is even worse. (A Progressive regulator is pictured to the left.)

I contend that banks and financial services companies have a direct interest in the safe, efficient, and profitable business of making loans, investments, and protecting assets. Would it benefit a bank to carelessly make loans to unqualified borrowers, taking the risk of never being repaid? No. Would it benefit a financial services company to recommend investments in financial instruments that continually lose money? No. Every private sector company has a direct interest in self-regulation.

Surely there will be incidents of fraud, theft, and abuse, but when such incidents occur, private companies will pay stiff fines under applicable Federal and State laws. When it is discovered that laws have been violated, corporate employees, and executives often face stiff fines and/or prison time. But what happens when government regulators screw up?

On August 9, 2007, former SEC Commissioner, Roel C. Campos officially announced his resignation.

On October 2, 2007, former SEC Commissioner, Annette L. Nazareth, a nine-year SEC veteran, officially announced her resignation.

On August 13, 2008, Florida’s top financial regulator, Don B. Saxon resigned before he could be fired. He was blamed for lax enforcement of state laws which allowed convicted felons to be licensed as mortgage brokers, including individuals who took part in mortgage fraud.

On January 26, 2009, Timothy Geithner, former President of the Federal Reserve Bank of New York, was sworn in as Secretary of the Treasury.

On May 7, 2009, Stephen Friedman, the former chairman of the Federal Reserve Bank of New York, abruptly resigned; days after questions arose about his ties to Goldman Sachs.

When regulators make costly mistakes most of them simply resign, disappearing into the shadows with taxpayer funded golden-parachutes. However, in some cases (Geithner) they get promoted. So there is no accountability when it comes to government regulation.

The case against more government regulation:

Raymond Richmond, in his latest article, Geithner and Summers Make Their Economic Mistakes Transparent, reminds us that the last major governmental intrusion into the private financial sector is what created our current recession. Instead of learning the valuable lesson that ‘government regulation equals no regulation’, the Progressive Obama Administration’s solution, like a junkie in relapse, is more of the same. “This time it will be different.”

“Here at home, we are on the verge of completing the most sweeping financial reform in more than 70 years.”

They failed to mention that the last major intervention in bank regulation caused this recession. Beginning in 1977 with the Community Reinvestment Act, every administration pressured the banks to make loans on easy terms, turning their eyes away from the housing bubble they were causing and the dangerous lack of collateral backing most mortgages. Government created two Government Sponsored Enterprises, Fannie Mae and Freddie Mac to create a secondary market for such ill-fated loans. Wall Street got into the act and created derivatives which brokers sold all over the world. When the housing bubble burst, the U.S. and Europe’s largest banks and insurance companies faced bankruptcy, and stock markets round the world collapsed. The U.S. does not need new bank regulations; it needs to keep the politicians from making decisions that should be left to the shareholders of private firms who have the major stake in the firm’s success. This is the lesson that should be learned around the world.

The past year and a half has seen unemployment grow in the U.S. to double digits, factories disappear, witnessed a worsening in the distribution of income, saw soaring government budget deficits, saw the U.S. dollar, the world’s standard, lose more than a third of its value in foreign exchange.

Prospects have never been worse. And all of these are the product of government intervention in the private economy. This is the lesson the G-20 ought to learn, government intervention in the economy usually does more harm than good. That would include intervention in the economy by the G-20, should it become an institution that makes and enforces decisions.

Michael Pomerleano in a Financial Times article entitled, The Failure of Financial Regulation, explains how government regulation failed. This is more proof that all of the time, effort, and money spent on government financial regulation has been for naught.

The regulation and supervision of the banking system rest on three pillars: disclosure to ensure market discipline, adequate capital and effective supervision.

Did the regulatory philosophy governing our financial markets withstand the test of the recent crisis? My conclusion is that all three regulatory pillars failed.

Was adequate information available before the crisis erupted? The information on the subprime exposure was out there for anyone who had the determination to collect and [analyze] the (sometimes patchy) data from quarterly 10Q reports filed with the Securities and Exchange Commission for US banks, supplemented by rating agencies’ and investment banks’ research reports.

A final question we need to ask is how effective was the supervisory apparatus in this crisis?

It is reasonable therefore to infer that the regulatory agencies would have taken notice of those estimates as early as the autumn of 2007. For a long time the regulatory and supervisory apparatus was silent.

We need to question why didn’t any regulator add up the potential size of the losses on the sub prime exposure, based on publicly available information, and verify them with on-site examinations?

Why wasn’t there a far more forceful response from the supervisory agencies? Equally, we should have expected credit rating agencies, investment research and investors to respond more forcefully. In this context, one can only express puzzlement and disappointment at the tepid regulatory reaction. Only after the monumental policy mistake of allowing Lehman Brothers to fail, did the authorities grasp the full significance of the problems and we witnessed a systematic effort to manage and contain the crisis.

Finally, Glenn Hubbard in his Harvard Business Review Article, Financial Regulation: It’s Not About More, reminds us that over-regulation by the government can do more harm than good.

…the economic concern that over-regulation of financial instruments and institutions in the name of safety can lead to aggregate harm — most obviously by raising the cost of funds to household and business borrowers. The key is to design regulation to insure proper pricing of risk and information about risk — such an approach (not that really taken in the bill winding its way through Congress) offers the right balance between protection of the individual and society.

The end result of the Progressive Obama Administration’s magical plan of more government regulation will lead directly to higher costs for American consumers and businesses. Businesses will pass their costs on to customers. Consumers will be hurt. Those who get hurt the most will be those on the lowest end of the economic food chain. Thus, the end result of Barack Obama’s cowardly, status quo, regressive, regulation policies will be to harm those that he claims to be helping.

Smaller government and less governmental regulation will lead to lower taxes, lower consumer prices, greater accountability, more freedom, and more opportunities for wealth creation. What exactly have we gotten in return for all of our money that has been squandered on regulating the financial industry? What will we get with Obama’s ‘more of the same’ approach?

Real Financial Reform, Part II | The Shawmut Redemption

The Shawmut Redemption…

Reforms that need reform…

Compiled by: Larry Walker, Jr. –

On November 16, 1993, the New York Times reported the following:

In a move showing banking regulators’ increased emphasis on ending loan discrimination, the Federal Reserve Board has, for the first time, blocked a large bank merger because of concern over possible bias against minority groups in mortgage lending.

By a 3-to-3 vote, with one abstention, the Fed declined to approve the Shawmut National Corporation’s acquisition of the New Dartmouth Bank of Manchester, N.H., because of concern that Shawmut, based in Hartford, may not have complied with fair-lending laws.

The Justice Department is investigating a Shawmut subsidiary, the Shawmut Mortgage Company, for possible lending bias…

“Obviously we’re disappointed with the decision,” said Brent Di Giorgio, a spokesman for Shawmut, which has $27 billion in assets. “Notwithstanding the decision, Shawmut is proud of its lending record to minorities.”

Over the last year Shawmut has begun several programs to increase lending to low-income Americans and minority groups that some community activists say have made Shawmut a leader in the industry.

These programs include establishing mortgages with down payments of as little as 2.5 percent that use more flexible income criteria, hiring more minority mortgage staff workers and sending around home buyers from minority groups to check that Shawmut employees are not discriminating.

“The Fed is sending a strong signal to the banking industry that they’re going to be looking at banks’ lending practices,” said Joseph Duwan, a banking analyst with Keefe, Bruyette & Woods. “Clearly Shawmut is being made a little bit of scapegoat.”

The End of Shawmut National

So what happened to Shawmut National Corporation? Two years after being extorted by the Federal government, in conjunction with various social justice organizations, the bank ceased to exist. Let’s follow the trail from the end of Shawmut, to the $700 billion dollar Federal Bank Bailout:

1995 – Fleet Financial Group, Inc. acquires Shawmut National Corp.

1996 – Fleet Financial Group Inc. acquires Westminster Bancorp

1999 – Fleet Financial Corp. acquires BostonBank Corp. and becomes FleetBoston Financial Corp.

2001 – FleetBoston Financial Corp. acquires Summit Bancorp.

2004 – Bank of America Corp. acquires FleetBoston Financial Corp. for $47 billion.

2005 – Bank of America acquires MBNA Corporation and becomes Bank of America Card Services for $35 billion.

2007 – Bank of America acquires LaSalle Bank for $21 billion.

2007 – Bank of America acquires US Trust and becomes Bank of America Private Wealth Management

2008 – Bank of America acquires Countrywide Financial for $4.1 billion and Merrill Lynch for $50 billion as part of the Bailout deal.

2009 – The Federal Government invests $45 billion of taxpayer’s money in Bank of America through the Troubled Asset Relief Program (TARP). Bank of America’s pays back the $45 billion along with $4.5 billion in dividends and fees.

The Bailout

The Federal government’s solution was of course to create new agencies, more regulations, and to spend more borrowed money with the excuse that this time it will be different. Although it claims that it could make money as did off of Bank of America, so far, the US Treasury, Office of Financial Stability’s $700 billion bailout has, through 4/30/10, disbursed $517.1 billion, been repaid $186.9 billion, and is owed a balance of $330.2 billion.

1993 to 1995

So what happened in-between Shawmut National’s reprimand, the denial by the Fed to acquire other banks, and it’s ultimate demise?

William A. Niskanen, in his May/June 1995 Cato Policy Report, got it right when he stated that, “Redistributive rules among or between buyers and sellers, however, usually lead one or more parties to leave the market.” His reasoning was correct. His prediction was dead on. The arguments he posed way back then are worthy of repeating.

He said, “A market is where people come to make exchanges. Every market has its own rules, and markets thrive or wither, in part, depending on the choice of those rules. Clear rules for payment; the penalties for nonpayment, fraud, and nonperformance; and the rules for resolving disputes, for example, usually induce growth of the market, increasing the expected net benefit to each party. Redistributive rules among or between buyers and sellers, however, usually lead one or more parties to leave the market. U.S. financial markets today face several major new policy threats. Most of the new threats have a common pattern: the government is using existing regulatory authority or proposing new authority to aid some parties in the market at the expense of others.”

Mr. Niskanen continued, “Federal bank regulators and the Department of Justice have increasingly reinterpreted their authority under existing law to develop an extensive system of credit allocation. The four statutes under which bank regulations are issued are the Fair Housing Act of 1968, the Equal Credit Opportunity Act of 1974, the Home Mortgage Disclosure Act of 1975, and, most important, the Community Reinvestment Act of 1977. The common objective of those four laws was to reduce the alleged discrimination in bank lending to minorities. I say “alleged” because the premise that banks discriminate is both implausible and unsupported.”

With regard to Shawmut National Corporation, he continued, “In summary, there is no consistent evidence that banks discriminate among loan applicants by race, either consciously or inadvertently. In Washington, however, no good deed goes unpunished. Two major banks with records of outreach to minority borrowers have been subjected by the Department of Justice to what is best described as extortion. In a major 1993 case, following actions against three small banks, the Federal Reserve held up approval of several proposed acquisitions by Shawmut National Corporation pending resolution of a discrimination suit brought by Justice against Shawmut’s mortgage company subsidiary. The facts of the case are clear. During the period when the alleged discrimination occurred, Shawmut had an aggressive program to increase mortgage lending to minority applicants. Shawmut relaxed its normal lending criteria, substantially reduced the rejection rate on loan applications by minorities, and doubled the amount of new mortgage lending to minorities. Although no private person filed a discrimination complaint, the Department of Justice charged Shawmut with discrimination, based on findings that some of the loan officers had not been as aggressive as others in approving loans to minority applicants and that Shawmut had no internal review procedure to ensure that all the loan officers used the same lending criteria. In order to remove the barrier to approval of its proposed acquisitions, Shawmut agreed to settle that absurd case, set aside $1 million as a settlement fee, and worked with Justice to find some “victims” of the alleged discrimination to share the fee.”

My Conclusion:

The chickens have come home to roost. The Progressives got what they wanted. Loans were made to people who should not have gotten them, who could not afford them, and who were bad credit risks in order to satisfy unreasonable government policies. In other words, the banks came up with whatever programs were necessary to ensure that anyone who applied for a loan got one. That took care of there ever being any question that a loan was denied based on racial discrimination. The banks used Option ARMs, no-doc, stated income or whatever it took to comply with the extortion. And what happened? The buck got passed. Banks were sold and acquired. Loans were packaged, sold and re-sold until they finally came back to their source, right smack in the government’s lap. The entire banking system nearly collapsed, and the Federal government came close to taking out the entire global economy. And it’s not over yet.

Have progressive politicians learned their lesson? Apparently not, as we see today, the progressives are trying to blame the crisis on those who simply carried out their warped policies. They are demonizing bank executives, Wall Street, Corporations, stock traders, and any and everyone who carried out their wishes. But it doesn’t take a degree from Harvard to figure out who’s really to blame. All one needs to do is look at how a progressive government manages itself. It is $13 trillion dollars in debt. Its trusted reserves of Social Security and Medicare have been emptied and left with IOU’s. And now it is heading towards $22 trillion of debt by the year 2020.

Obama had one thing right though, we do need to fundamentally transform the USA. However, that’s the only thing he got right. Policy-wise, he’s on the wrong track. He only offers to make a bad situation worse. Community organizers like Obama are part of the problem, not the solution. You cannot fix a problem when you are the problem. What America needs is a radical return to its founding principles of limited government, and free enterprise. We’ll know that we’re on the right track when every culpable progressive dimwit has been placed behind bars.

Real Financial Reform, Part I: The Option ARM

click to enlarge

Compiled by: Larry Walker, Jr.

While Progressives, both left and right, feign anger arguing the merits of criminalizing Goldman Sachs, one of the most profitable companies remaining in the United States, folks on Main Street are contemplating the real cause of the economic crisis of 2007. At least, that’s what I’m pondering.

For example, in reviewing the Office of Inspector General’s report regarding the fall of Downey Savings and Loan Association (Downey) it is clear to me that firms like Goldman Sachs were not the source of the problem. Punishing Goldman Sachs for profiting from a ‘crummy deal’ does not get to the root of the problem, nor will it prevent the next crisis. Where Senator Carl Levin fell short was in that, he failed to investigate the origination of the ‘crummy deals’ which continue to run rampant from coast to coast. But that’s what happens when you let amateur government workers have too much power.


Downey was taken over on November 21, 2008 by the FDIC at a cost of $1.4 billion. This placed it into the top ten most expensive institutions taken over by the FDIC during this crisis. It is revealing to note that in the report, we are told that the primary cause of Downey’s collapse was its high concentration of option adjustable rate (ARM) loans and its lack of documentation in loans:

“The primary causes of Downey’s failure were the thrift’s high concentrations in single-family residential loans which included concentrations in option adjustable rate mortgage (ARM) loans, reduced documentation loans, subprime loans, and loans with layered risk; inadequate risk-monitoring systems; the thrift’s unresponsiveness to OTS recommendations; and high turnover in the thrift’s management. These conditions were exacerbated by the drop in real estate values in Downey’s markets.”

The OTS made constant recommendations to the bank but of course, the OTS was stripped to the very minimum because of bank lobbying over the past decade. The policy implication here becomes radically clear that if we are to have a legitimate oversight board, it must have the power to enact regulations on the books. That is probably one thing many people fail to understand right now. Many of the regulations necessary are already on the books. Yet the bodies governing these policies are so weak and pathetic, that banks were able to ramrod legislation that essentially made them shells with no ability to enforce the laws.’

Downey by the end of 2005 at the height of the bubble had 91 percent of its single family home loan portfolio in option ARMs. They basically went 100 percent with this toxic product. 73 percent of Downey’s option ARMs had negative amortization potential which of course did occur and imploded the bank. Just take a look at this stunning chart:

As the chart shows, Downey was in the game early on. Thus, their recast of 5 years on their typical option ARM started imploding much earlier and led to their demise in 2008 even before the major wave of option ARMs will swarm the market in 2010 through 2012. The disturbing facts also come out regarding teaser introductory rates which artificially allowed people to buy more home than they could afford. With the availability of “no-doc” loans anyone with a desire to get a loan got one. The fact that 91 percent of their SFR loan portfolio is option ARMs is appalling. Institutions in California basically created a casino with housing even though agencies knew of the longer term implications. In regards to policy, this gives us clear implications:

  1. Do not bailout any mortgage product that is an option ARM.
  2. Government agencies overseeing these institutions must have teeth to act and stop companies before things get out of hand. Imagine the police with no power to enforce the laws on the book.
  3. Clearly these products had no life outside of the bubble. They should be labeled as such and any institutions engaging in these products goes forward at their own risk. No bailouts ever.


The bottom line, in Part I, is that Goldman Sachs was not in the loan origination business, and thus had nothing to do with the root cause of the financial crisis of 2007. Most of the culprits, banks who originated crummy deals, have already gone out of business. From January of 2009, through April 23rd of this year, there have been 197 bank failures. Of a certainty, there will be many more. The real questions should be (1) who legalized Option ARM’s?, and (2) who was responsible for regulating them? Try starting there and get back to me when you have a serious solution to a serious governmental failure.


Option ARMs
An “option ARM” is typically a 30-year ARM that initially offers the borrower four monthly payment options: a specified minimum payment, an interest-only payment, a 15-year fully amortizing payment, and a 30-year fully amortizing payment.

These types of loans are also called “pick-a-payment” or “pay-option” ARMs.

When a borrower makes a Pay-Option ARM payment that is less than the accruing interest, there is “negative amortization”, which means that the unpaid portion of the accruing interest is added to the outstanding principal balance. For example, if the borrower makes a minimum payment of $1,000 and the ARM has accrued monthly interest in arrears of $1,500, $500 will be added to the borrower’s loan balance. Moreover, the next month’s interest-only payment will be calculated using the new, higher principal balance.

Option ARMs are often offered with a very low teaser rate (often as low as 1%) which translates into very low minimum payments for the first year of the ARM. During boom times, lenders often underwrite borrowers based on mortgage payments that are below the fully amortizing payment level. This enables borrowers to qualify for a much larger loan (i.e., take on more debt) than would otherwise be possible. When evaluating an Option ARM, prudent borrowers will not focus on the teaser rate or initial payment level, but will consider the characteristics of the index, the size of the “mortgage margin” that is added to the index value, and the other terms of the ARM. Specifically, they need to consider the possibilities that (1) long-term interest rates go up; (2) their home may not appreciate or may even lose value or even (3) that both risks may materialize.

Option ARMs are best suited to sophisticated borrowers with growing incomes, particularly if their incomes fluctuate seasonally and they need the payment flexibility that such an ARM may provide. Sophisticated borrowers will carefully manage the level of negative amortization that they allow to accrue.

In this way, a borrower can control the main risk of an Option ARM, which is “payment shock”, when the negative amortization and other features of this product can trigger substantial payment increases in short periods of time.

The minimum payment on an Option ARM can jump dramatically if its unpaid principal balance hits the maximum limit on negative amortization (typically 110% to 125% of the original loan amount). If that happens, the next minimum monthly payment will be at a level that would fully amortize the ARM over its remaining term. In addition, Option ARMs typically have automatic “recast” dates (often every fifth year) when the payment is adjusted to get the ARM back on pace to amortize the ARM in full over its remaining term.

For example, a $200,000 ARM with a 110% “neg am” cap will typically adjust to a fully amortizing payment, based on the current fully-indexed interest rate and the remaining term of the loan, if negative amortization causes the loan balance to exceed $220,000. For a 125% recast, this will happen if the loan balance reaches $250,000.

Any loan that is allowed to generate negative amortization means that the borrower is reducing his equity in his home, which increases the chance that he won’t be able to sell it for enough to repay the loan. Declining property values would exacerbate this risk.

Option ARMs may also be available as “hybrids,” with longer fixed-rate periods. These products would not be likely to have low teaser rates. As a result, such ARMs mitigate the possibility of negative amortization, and would likely not appeal to borrowers seeking an “affordability” product.


My Budget 360

Obama Stumbles on Glass-Steagall

How Novel!

It looks like Barack Obama has reverted back to stage one of the Obama Learning Curve, ‘unconsciously insular’.

Click to Enlarge

His latest bright idea involves re-instituting the Glass-Steagall Act of 1933. Could this possibly be the same kind of overreaction which helped to prolong the Great Depression? After all, the Depression didn’t officially end until 1941. Obama constantly blames the 8 year Presidency of George W. Bush for our current economic woes, yet Glass-Steagall was repealed in 1999. I mean all you hear from this guy is the same tired whine about the ‘failed policies of the Bush Administration’. But then what does he do? He reverts to the failed policies of the FDR Administration.


“In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities. At the time, “improper banking activity”, or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors’ money…”

I thought our current dilemma was caused by a housing related bubble, not by commercial banks investing too much money in the stock market. In our time, banks took on too much risk by investing in risky home loans. Loans which were promoted by ‘liberal’ politicians under the false ideology that it was somehow a Natural, God-given, Right for everyone to own a home.

Reasons for the Act – Commercial Speculation

“Commercial banks were accused of being too speculative in the pre-Depression era, not only because they were investing their assets but also because they were buying new issues for resale to the public. Thus, banks became greedy, taking on huge risks in the hope of even bigger rewards. Banking itself became sloppy and objectives became blurred. Unsound loans were issued to companies in which the bank had invested, and clients would be encouraged to invest in those same stocks.”

Hmmm. This doesn’t even sound remotely related to our present woes.

Effects of the Act – Creating Barriers

“Senator Carter Glass, a former Treasury secretary and the founder of the U.S. Federal Reserve System, was the primary force behind the GSA. Henry Bascom Steagall was a House of Representatives member and chairman of the House Banking and Currency Committee. Steagall agreed to support the act with Glass after an amendment was added permitting bank deposit insurance (this was the first time it was allowed).”

It is interesting to note that even Glass himself moved to repeal the GSA shortly after it was passed, claiming it was an overreaction to the crisis.

An Overreaction to the Crisis?

It seems to me that all Obama has done is to stumble upon a method of prolonging the economic crisis. Instead of embracing obvious policies which have helped America out of every single recession since World War II (i.e. across the board tax cuts, and allowing the free market to correct itself), Obama has not only failed to come up with new ideas, he has ‘dug up’ the old tried and failed policies of the 1930’s. And this is the guy you were waiting for?

Barack ‘Carter Glass’ Obama could do us all a favor by just getting out of the way. If he would just sit down and hush up, the free market will eventually reach equilibrium. Sometimes it’s best not to meddle. You know what they say, “Jack of all trades; Master of none.”

Finally, what was it again which finally broke the Great Depression?

“Only when the federal government imposed rationing, recruited 6 million defense workers (including women and African Americans), drafted 6 million soldiers, and ran massive deficits to fight World War II did the Great Depression finally end.”

Is it possible that the War on Terror was our salvation, and not a mistake?