Banks and unfair priviledges

Banks and unfair priviledges

By Alberto Ferrucci

In 1933, after the Stock Market crash of ´29, the United States deliberated the Glass Steagall Act which imposed a clear distinction between commerical banks (which deal with savings) and investment banks (which gather capital through their securities for great financial operations, with higher profits and higher risks). This was a law that was effective for 66 years, until it was abolished in 1999 by a Republican majority and a Democratic president in order to make the economy more free.

Since then, without the previous rules, the American economy, thanks to the low cost of money and financial acrobatics, broke one record after another. Consumption also rose because many were tempted to take out credit beyond their possibilities. The side-effects of this drugged economy were felt sooner rather than later, however, as important banks failed and millions lost their jobs.

Government officials realized the danger of a block in the credit system and circulation of currency, and although they did not ratify their decision with public acts, found ways to avoid the failure of important banks in the future. And even though these banks are private, this fact now allows them to gather capital for whatever ends, and in Italy pay taxes on less than half of the income from savings accounts, selling titles which they guarantee but are in reality guaranteed by contributors.

These commercial banks can even use this capital for every type of speculative activity, distracting their officials (thanks to higher profits obtainable in this way) from that public service for which they originated, that is to treat savers and those requesting credit with the bank with professionality, helping them decide how they would be able to pay back a loan. This type of bank can be guaranteed by the state but not a bank that speculates in finance.

We hope that new rules accepted by everyone are reached on the international level. Italian officials are collaborating on the international level to formulate them. Appreciation for them is shown by the organisms entrusted with them, like that for financial stability, presided over by Mario Draghi .

We hope that speculative earnings do not make people forget the need for new rules, as if the crisis of the last few years was only something that happened, and as if the millions of workers who lost their jobs and suffer the consequences today do not even exist.

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