Wednesday, December 9, 2015

GLASS-STEAGALL | Why Bill Moyers Likes David Stockman

David Stockman led the war on government spending for President Reagan. His idea was to "starve the beast." Reagan cut taxes, then had to restore them.

Stockman still considers among his enemies those who espouse fiscal stimulus and central planning.

But he now inveighs against both parties, arguing as Ralph Nader does that both are beholden to Big Money for campaign contributions.

Stockman, who attended the Harvard Divinity School, says he was deeply opposed to the bailout of the financial institutions.

No wonder Bill Moyers sees in David Stockman's new song a melody he likes. The financial bailouts, says Stockman, have lured American private enterprise into a casino of speculation that leads to greater economic inequality. The securities markets are rigged against small investors. "We have neither capitalism nor democracy," says Stockman. "We have crony capitalism."

It's not surprising that Stockman's villains include Democrats FDR and Barack Obama. The surprise is that they include Republicans Richard Nixon and George W. Bush ("who repudiated fiscal rectitude and ballooned the warfare state via senseless wars"), and Fed chairmen Greenspan and Bernanke.

It's not surprising that his heroes include Republicans Dwight Eisenhower and Bill Simon. The surprises are Democrats Carter Glass, Harry Truman and Bill Clinton.

I am bemused by the list, especially after listening to David Stockman talk to the Cato Institute in 2013. Stockman doesn't spare Ronald Reagan and Milton Friedman from his criticism. He said that his book languished, as you might expect a 700-page book on money markets to do, until it was denounced by Paul Krugman, when it shot up to #4 on the best-seller list, behind two diet books and "a book on the walking dead".

There's a lot for Krugman not to like about Stockman's enemies list. How can you give credit to Carter Glass without recognizing that FDR enabled his legislation and in his response to the bank panic took a tough line on the banks? FDR and his Treasury Secretary Will Woodin let the insolvent banks stay closed. It was FDR who created the SEC, and traded the creation of the FDIC for strict laws preventing the investment banks from using the banks as a source of cheap money to speculate with.

It all worked well until Glass-Steagall was chipped away at, with the biggest blows being the Gramm-Leach-Bliley Act (the Financial Services Modernization Act of 1999) and then the  Commodity Futures Modernization Act of 2000. The chief engineer of these laws was an architect of the Reagan Revolution, GOP Senator Phil Gramm.

Stockman was part of a revolution that got what it wanted. He just didn't want what it got. His populist call to arms against crony capitalism would be more effective if he would recognize on his enemies list the people who tore down Glass-Steagall, and champion its restoration.