It's time to take the roulette wheel out of your bank's back room and out to the trash.
Even now, the American economy is at severe risk from two financial phenomena especially: the fact that financial institutions have been allowed to become "too big to fail," which is patently absurd to begin with; and the fact that banks have been allowed to use the strength of your deposits to invest in risky schemes for their own gain.
The chickens came home to roost in the Crash of 2008. Now it's time to fix the chicken coop.
President Obama this past week called for new regulations to prohibit risky bank investments and to prevent dangerous consolidation of financial institutions into behemoths whose failures could lead to a wider economic collapse.
We could not agree more with the president. His proposals are, to the Crash of 2008, what the 9-11 Commission's recommendations were to 9-11.
It is plainly outrageous and insanely irresponsible for banks to be able to invest in risky securities and other roller-coaster investments with your life savings and rainy-day funds -- and then to expect taxpayers to bail out those institutions when they crap out at the hedge fund table.
This was a lesson learned after the 1929 crash, but forgotten by the 1980s, when Wall Street and bank lobbyists -- jealous of big profits at investment houses -- began a full frontal assault on Congress to resume the shaky speculation that helped lead to the Great Depression. By 1999, the Roaring '90s had nearly everyone convinced that the good times were here to stay and that the Federal Reserve and others had a firm grasp of the economy's steering wheel.
So the Republican Congress foolishly repealed the 1930s Glass-Steagall law that had long prevented rampant bank speculation. For decades after the crash of 1929, banks had been prohibited from acting like riverboat gamblers. By 2000, the gaming tables were open again.
It must be said that in announcing his proposed return to Glass-Steagall types of regulations, President Obama did not mention Congress' role in the Crash of 2008. For years, the federal government, wishing to artificially increase home ownership, actually required mortgage lenders to provide loans to people with little or no ability to maintain them; then, those bad "subprime" loans were gobbled up by quasi-governmental Fannie Mae and Freddie Mac. We're not sure that situation is any better than in 2008.
Regardless, we stand firmly with the president in demanding a return to safe banking.
"We intend," he said, "to close loopholes that allowed big financial firms to trade risky financial products like credit default swaps and other derivatives without oversight ... and to ensure that the failure of any large firm does not take the entire economy down with it.
"Never again will the American taxpayer be held hostage by a bank that is too big to fail.
"The American people will not be served by a financial system that comprises just a few massive firms. That's not good for consumers; it's not good for the economy."
In proposing what he called the "Volcker Rule" -- after former Fed chairman and Obama adviser Paul Volcker -- the president said, "Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers."
Mr. Obama asked those in the financial industry to work with him, not against him, in reforming the system. We also urge them to do so -- for the sake of themselves, their customers and their country.