White House and Volcker's Attack on Glass-Steagall
June 20, 2012 • 8:06AM

With the pressure, both public and Congressional, for Glass-Steagall re-enactment approaching a breakthrough point, the White House has escalated public attacks by Treasury Secretary Geithner on Glass-Steagall, and the deployment of former Fed Chairman Paul Volcker against it. Phrases like "you can't put the toothpaste back in the tube" are being repeated as the markers of Volcker's call-up campaign. Just as with the fight to re-regulate electricity after the Enron "California dereg disaster" of 1999, this nonsense-Sophist's phrase veils the real meaning: "You'd better not try" Glass-Steagall.

On June 17, at a town meeting attended by about 1,000 people in Texas Republican Michael Burgess' district, a LaRouche activist spoke about Glass-Steagall, with an update on the number of signers in the House, asking whether or not Burgess would sign on. In her previous discussions with Dr. Burgess over an extended period, he had said he was considering supporting the Kaptur-Jones bill. But this time, Burgess told the crowd he now opposes Glass-Steagall. He said he had recently had a 45-minute discussion with Paul Volcker, and asked him about it; that Volcker told him it will not work, and was appropriate for the 1930s, but not for today. Burgess said Volcker told him that he is confident that the Volcker Rule will work, as it was written to deal with the changes in banking since Glass-Steagall (e.g., to avoid or block re-enacting Glass-Steagall). According to Burgess, Volcker repeatedly said, "You can't put the toothpaste back in the tube."

An article on www.sanantonio.com June 18 reported that regional bankers in Texas want Glass-Steagall re-enacted, including both the founder and the current CEO of the well-known Cullen/Frost Banks. But the website also carried the response of Dallas Fed chief Richard Fisher to its question about Glass-Steagall: "Can Glass-Steagall be resurrected? 'No,' Dallas Federal Reserve Bank President Richard Fisher said in San Antonio this week. 'You can't stuff the genie back in the bottle,' Fisher said." Two years ago, Fisher had signed a letter to Senator Maria Cantwell supporting her Glass-Steagall amendment.

And Fox News on June 19 featured a short interview with former FDIC Chairman Sheila Bair, now head of a new Pew Trust-funded private commission of notables on bank risk — which commission also includes Paul Volcker. Fox asked Bair only two questions: the first, on whether to restore Glass-Steagall, was prefaced by the interviewer's lengthy and fatuous praise of Volcker as a great "seer" and a virtual immortal. He then asked Bair if "restoring Glass-Steagall, putting the genie back in the bottle", was the solution to the bank crisis. Bair replied only that "There doesn't seem to be the support in Congress to do that."