J. P. Morgan Chase's recent announcement that the mega-bank had lost $2.3 billion making bad bets on unfathomable "credit derivatives" is like a lightning bolt on the horizon. Our political leaders have obviously not steered the ship-of-state far enough away from the financial storm that knocked down the entire economy in 2008. Wall Street is still gambling on the taxpayers' line of credit and putting the entire nation at risk. It doesn't take a genius to see why the problem was never fixed: Wall Street is bribing America's political leadership with campaign donations.
Yes, that's a crude explanation, but it also happens to be largely true. One of the parallels between banking reform and political reform is that while both systems are complex, basic and commonsense understanding comes easy. The most ordinary citizen can comprehend that while the public must underwrite traditional banking, taxpayers should never backstop anything that resembles gambling. An ordinary citizen can also understand the folly of permitting lawmakers to take campaign money from the same interests they regulate. Put it together, and it's hardly rocket science. A monkey could connect these dots, which form a clear picture of corruption.
The banking crisis of 2008, coupled with our government's inability to address the underlying causes of that crisis, is yielding one - and only one - clear benefit to the American people. It helps us see just how corrupt and dysfunctional our political system has become. What essentially needs to be done to fix the banking system is obvious. (Here is a clear explanation.) And it’s striking how much progressive outsiders and conservative outsiders actually agree on the nature of the banking problem and the necessary remedies.
Big banks must be broken up, with risky business separated from relatively safe FDIC-insured practices. Simpler solutions to banking reform are better than 2,300-page laws that regulators are supposed to implement because regulators can make mistakes and are subject to manipulation by financial and political interests. The Glass-Steagall Act was just such an approach that worked well for seventy years. Taxpayers should only back traditional lending. If a bank is mixing in riskier practices, then that aspect of the business must be broken off to stand on its own and suffer the consequences of any recklessness. No exceptions. End of story.
Incredibly, approaches that are clean and obvious usually don't happen because Wall Street has politicians from both parties in its back pocket. Of course there's a chance that public outrage and awareness could reach such an intense level that real banking reform might conceivably take place. But who wants a government that acts sensibly only in the wake of repeated calamities?
The President is now saying that the revelations out of JP Morgan demonstrate the need for the Democrat-passed Dodd-Frank Act. Barack Obama is doubling down on a law that shows every sign of failing (and he's worried about the implications JP Morgan's continued gambling habit) . For his part, Mitt Romney proposes no meaningful banking reform at all. Both politicians are taking in money hand over fist from Wall Street.
The madness only stops with comprehensive and non-partisan political reform. Just as a consensus outside of the Washington establishment is mostly established on banking reform, the shape of an outsiders’ consensus for political reform is also appearing. Lawmakers should not be permitted to take campaign money from the same interests they regulate. Congress should be comprised of citizen legislators from all walks of life and not professional politicians. Elections should always be fair. We, the people,all agree: we can't afford the corruption any more. We need to compartmentalize our many differences and not be distracted from pursuing the reforms that we all know are just common sense.