Well, thank you very much. I want to express to you my appreciation for you engaging and initiating this discussion here. It's something that's very important; it's something that needs attention, and it certainly needs relief. As I think…
Well, thank you very much. I want to express to you my appreciation for you engaging and initiating this discussion here. It's something that's very important; it's something that needs attention, and it certainly needs relief. As I think we all know, we are facing-- involved in one of the most serious economic crises in the history of this country. We haven't had an economic downturn as serious as this one since the Great Depression, which happened in 1929 and ran through the thirties.
One of the most interesting things about the way in which this economic recession has come about and continues is the failure, in fact, in many ways, the refusal of responsible people to understand what happened back in the 1930s and the relationship between what's happening now, the kinds of circumstances that caused that Great Depression similar to the circumstances that are causing this deep recession that we are experiencing now. And it's only a recession because we have Social Security now, which went into place after the Depression in the 1930s as a means to sort of fight against that Depression, and a number of other things which were engaged in to try to deal with it effectively.
There are a lot of people who are trying to eliminate some of those effective things. In fact, we had a President recently come in and say that we should privatize Social Security. I think we could imagine what might have happened if we had privatized Social Security and how much worse this economic recession would be today if the Social Security system had been privatized, and it then certainly would have been lost.
So this is a serious issue, and it's an issue that needs financial regulatory reform; and that need for financial regulatory reform has never been more evident for us in the context of our lives and especially our experience here in this Congress. We are still feeling the effects of that meltdown, which began in 2007 and then hit hard in 2008 on Wall Street. And now, 2 years after that 2008 meltdown, we still have record unemployment with roughly 15 million Americans currently out of work. Obviously, much needs to be done to deal with this and correct it.
Wall Street recovered rather quickly, interestingly enough, while the jobs and housing market remain on life support. It seems that Wall Street was able to recover quickly because it knew the housing bubble was on the verge of bursting and hedged their bets appropriately. And they knew that the housing bubble was on the verge of bursting because of the subprime mortgages that they manipulated into the context of investing operations. They knew what they had done, and they knew what was happening as a result of what they had done.
As we all know, the Securities and Exchange Commission recently made claims that Goldman purposefully created an investment, a collateralized debt obligation called ABACUS 2007-AC1, that was designed to fail. The SEC suspects that a Goldman Sachs employee--and probably not just one--Goldman Sachs employees purposefully misled clients into buying investments that were not only worthless but were almost guaranteed to have a devastating effect on the great economy.
I have signed my name onto two letters that are aimed at expanding the investigation of Goldman Sachs. One of those letters is to the Securities and Exchange Commission Chair Mary Schapiro and the other to Attorney General Eric Holder. Goldman Sachs deserves to be thoroughly investigated for this suspicious activity, but we need to keep in mind that they are not solely to blame.
It's not just Goldman Sachs that was responsible for this problem. Throughout the 1990s, there was unprecedented deregulation of the banking sector, which set the stage for Wall Street to run amok. Safeguards put in place in the 1930s to deal with that Great Depression were thrown out, and that is just fascinating how intentionally that was done. Safeguards put in place in the 1930s, thrown out and unraveled by both Congress and the Federal Reserve. As they let this happen, some of us tried to stop the deregulation, but we were in the minority. We should not delay in getting commonsense reforms passed that will increase consumer protections, regulate hedge funds and the derivatives market. And let us not forget to include a stronger Volcker Rule.
The Volcker Rule, interestingly enough, puts an end to an investment bank's ability to conduct proprietary trading with their bank deposits. This proposal also prevents bank holding companies from housing hedge funds or private equity branches. The overarching goal is very similar to what I tried to achieve when I submitted a Glass-Steagall amendment to the House financial regulatory reform bill.
Restoring the Glass-Steagall Act--which of course was passed back in the context of the Great Depression--would put back in place the clean division between commercial and investment banking that was first established in that Banking Act back in 1933. The original bill was put in place as a response to the Great Depression and resulted in decades of economic stability and prosperity. Throughout the 1990s, the banking lobby worked hard to undermine the Glass-Steagall Act, and it was ultimately overturned in 1999.
Yes.
That is exactly right, and I very much appreciate you putting that form up there, Cracks in Wall Street. It's a very interesting presentation and a very accurate presentation of the set of circumstances that were put into play over that period of time beginning in 1996 with this Congress here trying to manipulate the situation.
I remember how many of us fought against those things. We fought against them. We voted against them. And, of course, we voted against that elimination of that Glass-Steagall Act because we understood very clearly
that the elimination of investments, by allowing investment banks to work closely together with commercial banks and take issues like mortgages and manipulate the mortgages into subprime mortgages, and sell mortgages to people who were not able to afford them, and to continue to manipulate that mortgage system and to include that mortgage system into large investment packages, and those large investment packages which were weak and really didn't deserve nearly the kind of attention or the funding that they received were successful based upon--largely based upon, at least, the fact that they had mortgages within them. And people had the idea that, Well, mortgages are secure. Anyone who has a mortgage is going to pay that mortgage off. Hardly anybody misses their mortgage payment.
And it was the intentional manipulation of the mortgages in those investments which led to, to a great extent, the collapse of this economy and the collapse that we're experiencing now and all of the difficult circumstances we have to deal with.
Now, a lot of these things need to be addressed. Some of them have been addressed in the context of legislation that we have passed. The Senate is now struggling with that legislation, trying to pass something similar to it so that we could agree on something that is going to begin to modify this dire situation that we're dealing with. But the fact of the matter is there is more that we're going to have to do, not just the situations that are pending right at this moment. Even though they are critically important and they need to be dealt with and completed, there is more that needs to be done. And what needs to be done, including other things, is the prevention in the future of the manipulation of mortgages and the other kind of investment manipulation that took place in the context of this molding together of commercial and investment banking.
We need honest banking in this country. We have had it for most of the time, and most of the bankers in this country are honest and strong and safe and secure and working in the best interests of the people in their community. But there are exceptions to that, and those exceptions can be deep and dire, and we've seen the results of it in the context of this economic situation that we are dealing with now. It needs to be corrected, and I deeply appreciate you for bringing this subject up in this way and for bringing attention to the issues that you have presented in the context there next to you.
So thank you very much. It's a great pleasure to be with you in this context, and I sure hope that the opponents of this bill in the Senate are going to get the kind of pressure that they need from sensible places and sensible people, conscientious people, to make sure that they stop blocking it. We need to get these things passed.