Simon Cameron, a 19th century politician who served in the U.S. Senate and as an ambassador, said, "An honest politician is one who, when he is bought, will stay bought."
By this Cameron test neither party comes out unscathed. But by and large the leaders of Wall Street have gotten their money's worth from both sides.
In 1929, everyone, including commercial banks, were playing the stock market. There were few regulations and enforcement was sporadic. When the whole financial structure crashed like a house of cards, many banks failed also, and in those cases depositors lost most or all of their savings.
When the Roosevelt administration and a new Congress were elected in 1932, a top priority was to set up a structure that was intended to prevent such a catastrophe in the future.
The legislation was the Banking Act of 1933, usually called the Glass-Steagall Act, and it stayed in place until 1999 when it was formally repealed by the Gramm-Leach-Billey Act, signed by President Bill Clinton. But ever more generous interpretations had vitiated many of its provisions from 1960 onward.
A major feature of the Glass-Steagall Act was the separation of commercial banking from investment banking. Another was the establishment of the Federal Deposit Insurance Corporation, which insured most deposit accounts against a 1929 style crash.
In 2007, a crash eerily reminiscent of 1929 hit Wall Street. True, bank deposits were protected by FDIC insurance, but the 401K accounts which had replaced conventional pensions for many workers took a bath along with other investors in the stock market. But while the nation's economy crashed the big bonuses continued on Wall Street, sometimes using bailout money.
In both crashes, reckless speculation and lax enforcement of what was left of the regulatory structure were root causes. There was - and is - a revolving door between the personnel of the regulators and the regulated institutions. And politicians of both parties had their campaign coffers replenished by Wall Street. Thus the Dodd-Frank Bill was both more complex and less effective than the original Glass-Steagall legislation.
Sen. Chris Dodd and U.S. Rep. Barney Frank both had heavy contributions from bankers and brokers, as did President Barack Obama.
But these Democrats are less reliably honest per the Simon Cameron test. They do have fits of public spirit that override their loyalty to their campaign contributors. The Republicans in Congress, however, stay faithful to their benefactors, if not their voters.
The tea party folks object to the bailout of Wall Street, forgetting that George Bush proposed the bailout and Obama merely implemented it.
In one of their recent fits of public spirit, the Democrats set up the Consumer Financial Protection Agency as part of the Dodd-Frank Act, largely through the efforts of White House aide Elizabeth Warren. The Republicans sought to kill this infant in the crib by holding up Warren's appointment to be head of this agency and, of course, refusing to fund it.
Warren had her revenge, however. Moderate Republican Sen. Scott Brown faces a strong challenge from Democrat Warren in November.
Meanwhile, the Republicans also held up the confirmation of her replacement for head of the agency until President Obama made a recess appointment of Richard Cordray.
Warren had excellent credentials for the job, which is precisely why the Republicans feared her.
Some brave liberal (not Obama, he is moderate to a fault) should reintroduce Glass-Steagall again, in the original language. That bill protected us for 66 years. We could do worse; in fact, we are doing worse.
A big bank just lost a $2 billion gamble. Under Glass-Steagall they would not be permitted to play the stock market, or the futures market, or the derivatives market.
Banks should stick to banking, and defined benefit pensions should be reinstated to replace 401K accounts, which are just another mechanism for playing the markets. Then we can avoid another catastrophe. Twice is two times too many.