Dear Editor,
A string of train derailments recently in the USA has created heightened attention to rail safety nationwide. In early February, a train that was carrying toxic chemicals derailed in eastern Ohio, igniting a fire that covered the town of East Palestine in smoke. Another train operated by the same company derailed in Ohio on March 4. On March 15, two trains derailed in separate incidents in Arizona and Washington State. The derailment in Washington occurred along Padilla Bay, spilling 5,000 gallons of diesel fuel. The accident near the town of Topock, Ariz., involved a train carrying corn syrup. Other recent train derailments have occurred in Michigan, Alabama, and other states.
It is reported that the U.S. averages about three train derailments every day, according to federal data, though relatively few create disasters. Activists have decried a lack of action by both the government and railway operators. The state of Ohio has now sued the operator, charging that the East Palestine derailment was a product of the company’s negligence and recklessness. Still in the USA, the banking industry has seen the recent collapse of Silicon Valley Bank, the nation’s 16th largest, followed by Signature Bank and raising fear of a systemic collapse.
In an article published in the New York Times, Senator Elizabeth Warren laid the blame for these recent bank failures at the feet of leaders in Washington for their weakening of the financial rules. Accord-ing to Senator Warren, in the aftermath of the 2008 financial crisis, Congress passed the Dodd-Frank Act “to protect consumers and ensure that big banks could never again take down the economy and destroy millions of lives.” In 2018, following intense lobbying by Wall Street chief executives and their armies of lawyers and lobbyists, President Donald Trump, however, signed a law to roll back critical parts of Dodd-Frank. “The big banks won” declared Senator Warren.
They “won” until they didn’t. S.V.B.’s collapse set off looming contagion that regulators felt forced to stanch, leading to their decision to dissolve Signature Bank. The fear of contagion is far from over and in an unprecedented move Wall Street giants moved to end the spiraling banking crisis by agreeing to prop up troubled First Republic Bank, a mid-sized bank whose shares have been pummeled amid a wider banking crisis. Bank of America, Gold-man Sachs, JP Morgan and others will deposit $30 billion in First Republic in a bid to prevent the collapse of First Repub-lic, a collapse which could cascade into a global financial and economic crisis.
Clearly, lax regulation and corporate greed – a toxic mix- is the common link between these two seemingly disparate phenomena. To go back a bit in time, following the 1929 Wall Street Crash, the U.S. economy had gone into a depression, and a large number of banks failed. It led to the U.S. Senate Committee on Banking and Currency commissioning an inquiry in March 1932 later known as the Pecora Investigation, to investigate the causes of the crash.
The Commission’s exposure of abusive practices in the financial industry galvanized broad public support for stricter regulations, resulting in passage of the Glass-Steagall Banking Act of 1933, the Securities Act of 1933 and the Securities Exchange Act of 1934. In its Report, the Commission found that there was “low morals in high places.” In his memoir published in 1939, Ferdinand Pecora, after whom the Commission was named, wrote: “Bitterly hostile was Wall Street to the enactment of the regulatory legislation.” “Legal chicanery and pitch darkness were the banker’s stoutest allies.”
As Senator Warren would observe some nine decades later, nothing has changed. The “big banks” would prevail with rolling back in 2018 of critical parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In the blunt language for which he was known, Senator Harry Truman (later President) who investigated the railroad industry and in particular, the Missouri Pacific, called Wall Street financiers, “the wrecking crew” and a special interest group constantly ready to sacrifice the welfare of millions for the profits of a few.
Senator Truman, in the words of his daughter and biographer, Margaret, was worried by the erosion of the nation’s moral sense, by the awe and brutality engendered by over-concentrated financial power. Truman also believed that the time had come for the big financiers on Wall Street to realize that they had better start thinking and acting in the public interest. “Instead of working to meet the situation -the concentration of the control of wealth- they are still employing the best law brains to serve greed and selfish interest.”
Truman made the mournful cry that: “The ordinary government mine-run bureaucratic lawyer is no more a match for the amiable gentleman who represent the great railroads, insurance companies and Wall Street bankers than the ordinary lamb is a match for the butcher.” Return-ing to the recent spate of train derailments and bank failures in the U.S. and the principal causes, as the French would say, the more things change, the more they remain the same.
Senator Warren, however, is clear in her view and stated forthrightly that the “bank failures were entirely avoidable if Con-gress and the Fed had done their jobs and kept strong banking regulations in place.” She ended her opinion piece calling on Washington to act quickly to prevent the next crisis. Editor, the above related events hold lessons for all societies and us here no less. Sadly, and painfully, I can personally attest to the utter uselessness on the part of the entire regulatory framework, to protect the public interest and of their preoccupation to support corporate greed. Our “wrecking crew” is a hydra.
Sincerely,
Ronald Bulkan
