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PRESS RELEASE


Angelides: Takedown of Glass-Steagall
Allowed the Creation of the
'Shadow Banking System'

Feb. 4, 2011 (EIRNS)—In interviews conducted yesterday, Financial Crisis Inquiry Commission (FCIS) chairman Phil Angelides hit hard at the rise of what the FCIC Report calls the "shadow banking system," and he cited the crucial role the elimination of the Glass-Steagall firewall played in allowing the shadow banking system to eventually exceed the size of the regulated banking system ($13 trillion compared to $11 trillion) by 2008. [The entire Financial Crisis Inquiry Commission report, (Angelides report) that is referred to in this release, or sections of it, are available for download].

In an interview on WNYC's Brian Lehrer Show, Angelides noted that after the 1929 crash, the Glass-Steagall law prohibited banks from selling securities. But, he continued, as the shadow banking system grew, the banks said, "we want to be back in that business," and the walls began to come down.

Angelides urged listeners to download and read the FCIC report, and explained why this is so important. He said he has been around the financial industry all his life, but that he was "shocked" and "stunned" by what he learned in the course of this investigation:

"The extent to which our financial system went from a system meant to support the real economy—companies, job creation, wealth creation in this country—to a system that was about money making money, financial engineering alone, to the great detriment of the country.... It's all laid out there, it's a history that will stand the test of time."

In an interview on CNBC, Angelides emphasized that "What is striking is how little has changed" since the 2008 collapse, and he stressed that "a lot of the same risk factors are [still] there." Asked if it could happen again, he replied: "Absolutely." He declared that the "perfect storm" argument (referring to Bernanke's statement, quoted in the first chapter in the report, that the crisis was a "perfect storm" that regulators could not have anticipated), is a "very dangerous argument."

"If we accept the refrain that that 'no one could have seen it coming,' that 'nothing could have been done,'" Angelides warned, "it will happen" again.

Angelides pointed to the "incredibly brisk" sales of the book version of the report as evidence that there is a great hunger among the American people to find out how this happened, and how to prevent it from happening again.

On Feb. 16, Angelides is scheduled to testify before the House Financial Services Committee, and he will at some point also testify before the Senate Banking Committee, although the schedule for that testimony has yet been set.