Blankfein: You Destroyed Glass-Steagall, and You Got Us!

April 29, 2010 (LPAC) — The April 27 "Goldman Sucks" hearing of Sen. Carl Levin's Permanent Investigations Subcommittee succeeded completely in demonstrating — before the eyes of every news outlet in the nation — that Wall Street investment banks, even if not currently illegal, are thoroughly parasitical institutions for looting economies and people. Levin stated that there may have been an era, under the direct impact of the 1934 "Pecora hearings" into bank crimes and FDR's 1934 Glass-Steagall Act, when Wall Street investment houses brought capital together with businesses that needed it. But today there is no redeeming social value or purpose to the Wall Street casinos, with their 35-1 or 40-1 debt leveraged securities: "Goldman Sachs did well when its clients lost money. Its conduct brings into question the whole function of Wall Street," Levin stated.

Lyndon LaRouche has stated that Wall Street should disappear altogether, as part of a bankruptcy reorganization of the U.S. and international financial system, based on Glass-Steagall standards.

Ironically, even Goldman Sucks CEO Lloyd Blankfein had to put his finger on the elimination of the Glass-Steagall principle (it was weakened repeatedly by Alan Greenspan's Fed in the 1980s and 1990s, and finally repealed under Treasury Secretary Larry Summers' pressure in 1999) as the cause of his bank's behavior. Delaware Democratic Sen. Ted Kaufman asked Blankfein:

"Is it fair to say, in the last 30 years, that Goldman has focused more and more of its own resources and gained more and more of its revenue from trading on its own account, without the need for clients?

BLANKFEIN: We have focused more — we have focused more and more in trading as a principle....

KAUFMAN: But it's evolved away from kind of the classic investment banking and gotten more and more to trading?

BLANKFEIN: Well, I would say that increasingly — and this is a change in the sociology of the business that took place over the last 15 or 20 years — I'm not sure if it was precipitated by the fall of Glass- Steagall or it caused Glass-Steagall to fall, as U.S. institutions had to become more competitive with global institutions."

The killing of the Glass-Steagall principle plunged the bigger commercial banks into casino-like speculations and securitizations, as they merged with investment firms and insurance companies and issued financial derivatives that mounted to the hundreds of trillions. And for the Wall Street investment firms, it handed them previously unheard-of ability to borrow and leverage themselves, to blow up the speculative "junk" operations of the financial casino.

The principle of Glass-Steagall needs to be reimposed, and the actions of Wall Street's Goldman Sachs shut down — globally.