Nurture Success

Continued from Part 2- The End of the Dream?

Rescue from the Brink of Economic Collapse

Schama then tells a story of how, in 1907, at a time when there was no banking regulation, there was a devastating financial crash. The U.S. financial system, in fact the entire economy, was on the verge of meltdown – again, does this sound familiar?

I confess I was not aware of this story. Apparently, J.P. Morgan called a meeting of the leaders of all the major banks and locked them in his library until they all agreed to contribute to the economy. Thus, Morgan single-handedly saved the day. This is where history clearly deviates from the current crisis, in which the bankers expect the government to bail them out, and those which are not rescued go under.

The Federal Reserve was created to regulate the banking system. However, the 1929 crash left 25% of the American workforce jobless.
 
President Roosevelt and the New Deal

FDR’s New Deal was a radical plan designed to relieve hardship. From 1933 onwards, President Roosevelt created a number of projects including the Works Progress Association (WPA), which employed young people. Some of them were put to work digging ditches; others were employed as writers and actors; and still others built the Hoover Dam. A lot of the people employed by the WPA were young African Americans, like my father.
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President Obama has been compared to FDR many times. Like Roosevelt, Obama has come to office at a time of great economic upheaval. Unlike Roosevelt, the President and his administration decided that it was necessary to bail out the banks in order to prevent a financial meltdown. But Obama is also learning from FDR's example.

Separating the Casinos from Our Savings

Under FDR’s administration, the Glass-Steagall Act was introduced in 1933. This prevented banks in which people place their savings from gambling with those same savings. Again, I was unaware of this before I watched this programme. Glass-Steagall was designed to prevent the banks from speculating with savers’ cash. It did this by separating commercial from investment banking.

To read more, see The Glass-Steagall Act.

In the five years leading up to the act, about 10,000 banks had failed. For the next several decades, there were virtually no bank failures. In other words, it worked.

However, by the 1970s, many loopholes in the act had been found and exploited. Glass-Steagall was finally repealed in 1999 under a Republican Presidency. So guess what, we now have another economic crisis.

Those who do not learn from history will be condemned to repeat it.

The legislation which Obama currently wants to introduce is similar to Glass-Steagall - he wants to separate commercial banks from investment banks (casinos).

Of course, he is being criticised about this as he has been about everything. If he did not want to introduce this legislation, he would be criticised for that, too.

FDR was determined to stop the banks from speculating with depositors' money.

Similarly, President Obama has stated that we will get back “every penny” we have given to the banks and major corporations in the bailout. Gordon Brown and his administration have made no such pledge. I wish the government here in the UK were so determined to get financial justice for the people here.

See also: President Obama's Inauguration Day.