Franklin Roosevelt's Forgotten War with The Supreme Court

by Nomad

As the Supreme Court deliberates the constitutionality of President Obama's health care plan, it might come as a surprise to a lot of people that this isn't the first time a progressive president has come up against a conservative Supreme Court. Franklin Roosevelt encountered similar problems when he attempted to implement his own economic reforms.

Of the Court's overreach, the president in his ninth fireside chat told the American people, "To the far-sighted, it is far-reaching in its possibilities of injury to America."

Battle Between the Branches

This event of our day and age would not be the first time the Supreme Court has been accused of activism and overstepping its prescribed powers. And this isn't the first time a crisis has developed between the Judicial and the Executive branches of the United States Government.

On March 9, 1937, Franklin Roosevelt, speaking by radio to the nation described the problem of an obstructionist Supreme Court, and the need for a drastic re-evaluation of the process. 
Roosevelt stated the problem very directly "The Court" he claimed,"has been acting not as a judicial body, but as a policy-making body." He went on to cite, with quotes of dissenting opinions from other High Court judges, instances after instance in which the Court went beyond its duty.

I want - as all Americans want - an independent judiciary as proposed by the framers of the Constitution. That means a Supreme Court that will enforce the Constitution as written, that will refuse to amend the Constitution by the arbitrary exercise of judicial power - in other words by judicial say-so. It does not mean a judiciary so independent that it can deny the existence of facts which are universally recognized.

His proposal was that "hereafter when a Judge reaches the age of seventy, a new and younger Judge shall be added to the Court automatically."

Obama’s Impeachment: Mr. Jones and the War Powers Act 2/2

by Nomad

In the previous post in this series, we examined in detail the resolution put forward by Republican Congressman Walter B. Jones of North Carolina charging President Obama with impeachable acts for his handling of the incidents in Libya last year. For the most part, we have seen them to be specious and without any real foundation. As I mention at the close of that post, there still seemed to be something I was overlooking. We'll begin with a closer look at the law.

The War Powers Act as Written

source:

To understand more about the War Powers Act, we need to take a small step back in time. 

In an attempt to put in practice the lessons learned from the Vietnam War, in 1973 Congress established the War Powers Resolution (later called the War Powers Act) which attempted to limit the president’s ability to wage undeclared wars; more precisely to limit the president’s ability to conduct a protracted military engagement without the authorization of Congress.

The act also attempted to clarify the ambiguity on the Constitution which considers the president the Commander in Chief of the Armed Forces while at the same time, gives Congress the power to declare war and to provide the funding.

Obama’s Impeachment: Mr. Jones and the War Powers Act 1/2

by Nomad

Republican  Congressman
Walter Jones of North Carolina

Republican Walter Jones of North Carolina recently sponsored a resolution (H.CON.RES.107) “expressing the sense of Congress that the use of offensive military force by a President without prior and clear authorization of an Act of Congress constitutes an impeachable high crime and misdemeanor under Article II, section 4 of the Constitution.” 

It would all too easy to write off Jones’ resolution as just another time-wasting exercise by a Congress that has already engaged in such foolishness as reciting the Constitution on the House floor. (If Vanity Fair’s calculations are accurate, that political stunt cost taxpayers a cool $1.1 million.) 

Or the embarrassing reaffirmation by Congress of the national motto “In God We trust” a resolution proposed by Rep. Randy Forbes, Republican from Virginia. (Only nine risked God’s wrath and the measure was passed 396-9, with 2 abstentions.) These are merely two examples from a list of proposals and resolutions. This kind of silliness might account for the fact that a New York Times poll in October of last year found that Congress' approval rating fell to an all-time low of 9 percent. The 112th Congress will undoubtedly go down in American political history as the most disliked. 

The Uncomfortable Truth about Iran: How the US Lost a World

 by Nomad

Amid all the advertisements for gas-guzzling cars, there is an interesting editorial from LIFE magazine, dated May 21, 1951. The title:

"How to Lose a World: Our Government's Deplorable Performance in Iran Has Contributed To a Great Disaster."

At that time, because of its location and its petroleum, Iran was caught between two great millstones of conflicting ideologies, Capitalism and Communism.

Britain, heavily reliant on Iranian oil, had directly controlled the oil monopoly through the British Anglo-Iranian Oil company (later to become BP) but now, suddenly the rules of the game had changed.The author neatly summarized the lead-up to the foreign policy disaster like this:

LIFE Magazine Examines Wall Street and Banking in 1946

by Nomad

In light of the announcement by JP Morgan CEO Jamie Dimon that his firm has lost $2 billion investing in derivatives, I thought I'd take this opportunity to re-post this article, originally published in my general blog, Nomadic View.

The most amazing thing about a casual look through the back pages of LIFE magazine is how relevant the articles can sometimes be. For example, take the January 7 1946 issue about Wall street "the Citadel to US Capitalism."

One of the side articles details the more conservative approach to banking following the world war and its origins. The story provides quite an education in the varied aspects of banking.

On Wall Street there are two principal kinds of bankers: Commercial bankers and investment bankers. The commercial banks, such as Chase and National City, make loans, accept deposits, finance foreign credits, buy government and state bonds. They also usually have a trust department which executes wills and acts as trustee. The investment bankers, such as Morgan Stanley and Kuhn, Loeb underwrite and distribute new security issues for corporations. They also have a brokerage department which buys and sells securities.

The Banking Act of 1933 made it illegal for one firm to act both as a commercial act and investment banking house. Until then, the two were often combined. In his triumphant days, J.P. Morgan, a banker, merged railroads and steel companies into nationwide corporations. In the 1920s, Wall Street made idols of men like Charlie Mitchell, chairman of National City Bank, who was also the greatest securities salesman in history and an adroit market manipulator. The 1929 crash exposed the dangers of these dual functions, With one hand, banks were taking deposits. With the other, they were financing new securities. When the business they were promoting failed, the depositors, security holder and the bank itself were in trouble.

Today the very nature of Wall street bankers has changed. In place of the speculators and market manipulator there are sound, deliberate investors who by choice as well as by law are more interested in government bonds than in a flier in market.

The Banking Act of 1933, also known as the Glass-Steagall Act, introduced banking reform and safeguards on deposits following the crash of 1929. Many of the provisions were also designed to reduce the amount of wild market speculation which was thought to be contributing factor to the collapse.

The Glass-Steagall Act passed after an ambitious former New York prosecutor, collected enough popular support for stronger regulation by bringing bank officials before the Senate Banking and Currency Committee to answer for the role in the crash.

In addition to the Banking Act of 1933, the Bank Holding Company Act was passed in 1956 and extended the restrictions on banks. According to this, bank holding companies owning two or more banks could no longer engage in non-banking activity and could not buy banks in another state.

Altogether, an impressive bit of banking regulation. The Banking Act of 1933 reduced the amount of free-wheeling risk-taking- with depositor's assets, I mean. And the Bank Holding Company Act clearly defined the role of banks and kept bank holding companies from becoming "too big to fail."

And you know something? It actually worked. Nations, which adopted such regulations and stuck to them when the rest of the world began to de-regulate, such as China and Turkey, have emerged from the latest crash, jolted but not devastated.

Another Fine Mess

So what happened? How did we come back in a full circle? Through a careful whittling away of the legislation through intensive and sustained lobbying by special interest groups, starting as far back as 1980 with the Depository Institutions Deregulation and Monetary Control Act.

This allowed banks to merge. Subsequent decisions by the Federal Reserve Board in 1986 and 1987, after the Board heard proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions, further undermined the regulatory effects of the the Banking Act of 1933. 
For a full account of the various steps, see HERE. (The link is very enlightening)

The record shows a Federal Reserve Board, at the very least, flawed by its willingness to accept the demands of institutions to circumvent the laws were designed to regulate and control precisely those sectors.

Finally- perhaps inevitably- the Banking Act of 1933 was repealed in 1999 by the Gramm-Leach-Bliley Act. The legislation was signed into law by President Bill Clinton on November 12, 1999. (The role that Senator Phil Gramm played in this dismantling of regulatory protection has been cover extensively in another post.)
From there, it was a slow predictable march to the sorry mess of 2009.

Greed is Good?

What on earth could have persuaded, sensible people with all the wisdom a chastising experience as the Great Depression, to lift restrictions and to deregulate and repeal? The only answer seems to be the temptation of tremendous profits that de-regulation allowed financial institutions. In short, greed.

Much to their credit, Republican Senator McCain of Arizona and Democratic Senator Cantwell of Washington made a proposal for a return to the Glass-Steagall Act, specifically the distinction between commercial and investment banking. Ironically this regulation rollback to the 1930s is being called "Obama's banking reform", making it sound untested and potentially risky when a stronger case of risk by deregulation of the banking industry in the 1980s could- and should- have been made at that time.

Despite the crisis of 2008, banks, which have continued to rake in vast profits, have been strongly opposed to a return to the restrains of the Banking Act of 1933. Not surprising, is it?

As The New York Times reports:

The outlines of the Volcker Rule, one of the flagship provisions of the sweeping financial regulatory overhaul passed last year, will begin to take shape this week as regulators propose rules to limit the ability of most banks and Wall Street firms to use their own funds to buy and sell stocks, corporate bonds and derivatives.

For more information about the Volcker Rule, NYT gives a concise explanation of the reform.  
Wall Street will simply have to choose between being a source of dependable investment or a free-wheeling casino, but, it is a shame that we have to learn these lessons twice.

Update:

Mitt Romney has gone on record as wanting to repeal much of the reform legislation that President Obama and Congress enacted in light of the financial crisis of 2008. The Boston Globe reported in August of 2011:

Republican presidential candidate Mitt Romney has sharpened his critique of the financial regulatory overhaul signed by President Obama.

In response to the financial meltdown, Obama and Congress passed the Dodd-Frank bill, Wall Street reform legislation that enacted consumer protections, reformed some derivatives trading, and imposed new regulations on mortgage lenders and hedge funds.

In the past, Romney has criticized the bill for creating uncertainty in the financial industry and causing bankers and the financial service employees to pull back.

The lobbyist for the banking industry worked hard at watering down the legislation in any case and as a result, left many loopholes for financial institution to skate around regulations and oversight. 

From TalkingPointsMemo:

Dimon claims that the investment in question wouldn’t have violated the rule had it been in effect — he says the bets JPM made were meant to hedge against potential losses in other investments. But finance experts have cast doubt on that claim, and Dimon himself admitted that the incident will provide ammunition for the Volcker Rule supporters.

Politically, the latest financial disaster could create more doubt in the minds of the voters that the Republicans (in the form of Mitt Romney) is a little too eager to win the support of Big Banks and Wall Street and are setting up a repeat of the 2008 meltdown of the economy. 

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Related articles

• Volcker Rule To Restrict Banks' Proprietary Trading Contains Loopholes, Experts Say (huffingtonpost.com)
• Volcker Rule gets FDIC approval (money.cnn.com)
• AND NOW WE KNOW THE TRUTH ABOUT WALL STREET: It's Just Kids Playing With Dynamite (businessinsider.com)
• How J.P. Morgan Chase Has Made Case For Breaking Up Big Banks And Resurrecting Glass-Steagall - OpEd (eurasiareview.com)
• JP Morgan $2 billion loss stirs memories of 2008 crisis (csmonitor.com)
• Banks' Glass-Steagall Walls Quietly Rebuilt (Update 1) (jhaines6.wordpress.com)
• Wall Street, Romney, and Obama (crooksandliars.com)
• One Last Chance To Get Wall Street Reform Right (tpmdc.talkingpointsmemo.com)