John Weeks: Obama gave the banks time to rally opposition to severe regulations; another banking collapse is on the way
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. And this is the third in our series of interviews with the political economist John Weeks. John is a professor emeritus at the University of London. He’s the author of the book Capital, Exploitation and Economic Crisis. Thanks for joining us again, John.
JOHN WEEKS, POLITICAL ECONOMIST: Thank you.
JAY: Well, John, as the Occupy movement in New York and more than 50 cities around the world now, and many other forms of people’s struggles [snip] what do you think should be the central demands people should be raising?
WEEKS: I would say to them, focus on the banks, focus on what you might call Glass-Steagall on steroids. Glass-Steagall Act of 1933 was what severely restricted what banks could do. Until 1980, banks could not play the stock market, they could not speculate in real estate. They basically–they couldn’t do anything that–of those fun things that bankers like to do. They had to do dull things like lend for mortgages and lend to businesses to build new factories and hire people, things like that. There should be very severe restrictions on corporate pay, because to a certain extent that money’s being taken away from the shareholders, the banks, and I don’t–my heart doesn’t bleed very much for them, but it is tied up with excessive charges and many of the anticonsumer practices of banks. So I’d have strict limits on that. And some countries do.
JAY: When you look at the attempts to have some kind of regulation over banking, over speculation, I mean, nothing very effective has been passed in the United States. The Dodd-Frank bill, you know, told the Commodity Futures Trading Commission to regulate commodities, and they’ve come back with the weakest of regulations after massive lobbying efforts. If you really can’t find effective ways to regulate these banks, is the only real alternative then to have some kind of public banking? And if that is, what might that look like?
WEEKS: If Obama, when he gave his inaugural address, had taken a very strong position on the banks, put the bill through, had it prepared beforehand–. The Glass-Steagall Act of 1933 was passed two weeks after Roosevelt was inaugurated–inaugurations were in March in those days. Alright. That’s what Obama should have done. Now we have a much more difficult task because the banks are scared. They were scared in 2009. The big banks were very, very worried. You know, how bad was it going to be? How severe were the regulations going to be? And then the bill was delayed and delayed. Seeking compromise, the consequence of that was to give the banks the time to rally opposition, to strengthen themselves, to come up with an alternative narrative about why the economy has collapsed. I mean, think about it for a moment. Spring of 2008, 8 million people unemployed in the United States. Spring of 2009, 15 million people unemployed. The action of those banks led to millions, literally millions of Americans losing their jobs. People were furious, and they knew who did it, too. In the spring of 2009, we knew who had done it. And then the financial sector, bit by bit, developed an alternative narrative, and the alternative narrative became: it was the government that did it, it was the government ran these huge deficits; it overspent, you know, it weakened the American economy, it weakened the confidence of the private sector, and it left us in this mess; and it’s the government we have to do something about. It was a triumph of propaganda that makes Goebbels look like an amateur. Okay. So what do we do about it? Well, we have–I’ll tell you what I think is going to happen, as long as we’re in–I’m in an apocalyptic mood. There’s going to be another banking collapse. It will probably be in the next year. It may be just as bad. It will be triggered by the euro. The Greek bailout will not work. It is not working. Greece will have to default. A substantial number of large European banks will have to be bailed out. Probably some US banks will have to be bailed out again. And perhaps that will, this time around, galvanize action. I certainly hope so, ’cause we missed the opportunity. You know, the US government has major ownership in some of the biggest banks in the world, but we aren’t using it. Imagine what we could do if we the people got our government to use those banks in our interest.
JAY: And what would banks in the public interest look like? Are there any examples of it?
WEEKS: Alright. Well, I, along with two other people, have written a study–well, it’s a pamphlet, really, it’s a political pamphlet in Britain about what the British government should do, that if labor comes back to power in Britain, what they should do. Those banks which the government holds a strong voting share in, that the government should exercise that voting share. When it exercises it, it should appoint a director of those banks, and that the function of the banks would then become to use their excess liquidity, which there’s a lot–that’s just a big word for saying their capacity to lend. So they haven’t been lending. First of all, the expectation is down. Then why lend for something productive when you can make a killing by speculating? So [incompr.] appoint a government administrator who would then direct the banks that they had to use their liquidity for infrastructure projects, for lending for things like software industries, green power. I mean, imagine if the liquidity, the excess liquidity in Citibank were being lent to companies to make wind turbines or solar panels. Not only would we become competitive, but we could start exporting those [incompr.] people and so on. So I think that our concrete recommendation is the government of Britain [incompr.] when Labour comes back to power–the Conservatives are not going to do it–when Labour comes back to power, they use their power in or their influence in the partly nationalized banks to have them lend for productive and infrastructure purposes.
JAY: Thanks very much for joining us, John. And thank you for joining us on The Real News Network.
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