To the editor:
The primary cause of the 1930s’ Great Depression was speculation by commercial banks in the stock market. The depression was prolonged by President Franklin Roosevelt’s numerous quack remedies of spending and intervention. Because of the banking abuses, legislation was enacted in 1933 — known as the Glass-Steagall Act — to erect a barrier between investment banking and normal commercial bank operations to prevent another financial disaster.
That act was wrongly repealed in 1999 when President Bill Clinton signed the legislation to deregulate the banking industry, allowing the banks once again to police themselves. Wall Street is now laughing at America, because by the end of 2015, the four largest investment banks in New York have created credit swap derivatives of $186.6 trillion. A derivative is an agreement between two parties to pay each other money depending on the performance of some other underlying asset, such as a bond.
We know that Hillary Clinton has amassed an enormous campaign chest by making speeches to wealthy donors, such as hundreds of thousands of dollars received from Goldman Sachs. Goldman Sachs alone has created $51.15 trillion in derivatives.
Massive losses by an institution creating derivatives will allow them to use their bank deposits to offset the derivative losses. This is known as a bail-in and the depositors can be wiped out. The Glass-Steagall Act must now be reenacted to prevent Wall Street’s creation of a new class of victims caused by financial weapons of mass destruction.
Robert A. Dahlquist