Walter Bagehot was a British 19th essayist and editor of The Economist from 1861 to 1877 in an era of heightened pomposity. Unlike the dyspepstic, bombastic and often curmudgeonly Thomas Carlyle, his writing made one feel he could be your friend.
He had this to say about political economists: “No real Englishman, in his secret soul, was ever sorry for the death of a political economist: he is much more likely to be sorry for his life.”
Walter Bagehot was learned and casual: the kind of person I would like to invite to a dinner of friends, if I had any friends.
In 1999, in the spirit of the neoliberal global political economics which had taken off with the Reagan administration, the Clinton administration repealed the Roosevelt administration’s 1933 Bank Act, aka the Glass-Steagall Act. This act was the federal response to the banking practices which had led to the Great Crash and the Great Depression. It separated depository banking and investment or speculative banking and protected savings held by depository banking. It was a key feature of the New Deal.
The Clinton repeal of Glass-Steagall allowed for bigger banks to gobble up smaller ones, for deregulation of investment banking and for depository banks to enter other kinds of businesses. Beginning in 2008, investors withdrew sources of financing from the investment banks and this became known as the subprime mortgage crisis, or the Great Recession. Freddie Mac and Fannie Mae were taken over by the federal government and Lehman Brothers went bankrupt in 2008. Other large investment banks were expected to follow and a U.S. federal bailout began with $85 billion to AIG. Eventually, trillions of tax based dollars were paid out by the federal government on the principal that these institutions were TOO BIG TO FAIL and that failing to do so would wreck global economic havoc. The CEOs etc. took their bonuses from the payouts. And they were TOO BIG TO JAiL.
Walter Bagehot wrote “Any aid to a present bad bank is the surest mode of of preventing the establishment of a future good bank” over a century ago. And of course, the Trump administration will further deregulate an already highly speculative financial investment industry, just as the Lesser of Two Evils would have. It’s End of the World Hoarding.