Transcript: Thom asks Dan Gainor and riffs about 'was Jefferson right when he said bankers are more dangerous than a standing army?' 07 October 2009

Thom Hartmann: And greetings my friends, patriots, lovers of democracy, truth and justice, believers in peace, freedom and the American Way. Thom Hartmann here with you. The Financial Times reporting banks made 38 billion dollars. This is just US banks. Actually most banks around the world can’t do this, it’s illegal in most countries. "US banks stand to collect a record $38.5bn in fees for customer overdrafts this year", and the year, of course, ain’t over yet, "with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s". The fees are nearly double those reported in 2000. And uh, this a grim reminder of the fact that Eliot Spitzer back, you know, years ago, back in February 2008 actually, was warning us about this. That the banks have been basically turned from nice safe predictable boring consistently profitable but not incredibly profitable utilities into casinos. And I think it’s a terrible thing, it’s one of the things that is damaging America.

Dan Gainor, the Vice President and T. Boone Pickens Free Market Fellow at the Business and Media Institute,, is on the line with us. And, Dan, hey, welcome to the show first of all.

Dan Gainor: Oh it’s a pleasure. Hey, it’s a pleasure. Welcome to my wonderful non-studio from near the wonderful liberal Columbia Maryland.

Thom Hartmann: Oh that's great, yeah, hey, we’re bringing Dan in by Skype, so if you’re watching out free video over at, or hanging out in our free live chat room at you can see Dan, Dan’s smiling face. Uh Dan, here’s my position on this, and tell me why any conservative would be opposed to this. This seems to me like a Barry Goldwater position, frankly. Banks are the, and why Thomas Jefferson said you know, banks are more dangerous than standing armies. Banks are the utilities that facilitate commerce. Banks don’t make things, they allow companies to have access to capital so they can make things. Banks don’t pay my bills they are the means by which I pay my bills. I have no problem with banks operating on a for profit basis but why should they be allowed to get into the gambling casino business basically, into the stock market. Why should they be trading and operating in a way that is purely based on maximizing their profits rather than providing a benefit to us?

Dan Gainor: Well they do provide a benefit to us. In case you hadn’t noticed we have a whole bunch of banks, the great thing about the free market is you get to choose which one you want. There’s a lot of covers right now in Capitol Hill about the issue of fees, whether you get the overdraft fees or not. Representative Carolyn Maloney is going after the banks. But tens of major banks have already changed their overdraft fees because they’re losing out on their credit cards to debit cards. At the very same time, I mean, you must have seen "It’s a Wonderful Life" and not taken the right message from it. The right message is for every Mr. Potter there’s also a community group.

Thom Hartmann: But Dan, you say there’s competition but the reality is that banking in the United States is handled by a cartel. There’s about a dozen companies that basically control virtually all of the banks, the vast majority of banking in the United States. And even the small banks are starting to make a profit. And when you allow, you know it used to be that we said, okay banks you can recover the actual cost of somebody bouncing a check. So if you bounced a check it was a $3.50 charge. This is back when I was a kid. And nowadays, it’s like hey you can make a profit on this. So they have an incentive now for, when I deposit a check to hold that money for three days and say no you don’t actually have that money, in the hopes that I’ll write a check against it, it will bounce and they can make a $35 or $40 or $50 fee. That’s a perverse incentive. That's...

Dan Gainor: First of all only one in six people uses their overdraft protection, according to this study in the last year. And then, the vast majority of those are happy with getting the overdraft protection. Why? Because otherwise, checks would bounce. Their rent would not get paid, their mortgage would not get paid, so they pay these bills when the people don’t have the money. If the bank shut this down tomorrow, and said we’re not going to give you overdraft protection, you can just hang it out, then all sorts of other things would not get paid.

Thom Hartmann: I’m not saying that this should go away. What I’m saying is that we should say to the banks, banks, many of our banks right now are making more profit on overdraft protection than they are on their core business. And the banks should be in the core business of banking, they shouldn’t be in the business of playing Gotcha. This is Gotcha.

Dan Gainor: It’s only Gotcha because a lot of people in this country learned the wrong lessons, or frankly learned no lessons from going to the public school system about how to handle their money. You don’t use overdraft protection if you actually pay your bills correctly. You don’t like the bank you’re going to, go a credit union. I belong to both a regular bank and am a proud member of the MECU, Municipal Employees Credit Union, in Maryland, because my father was in it. I, you can join that. They don’t even have a fee, per se, it goes into a revolving line of credit.

Thom Hartmann: No, I’m a big fan of Credit Unions, and I’m with you on that, but...

Dan Gainor: So then go to credit unions if you don’t like the banks, problem solved. You’re a solution looking for a problem.

Thom Hartmann: But the banks are ubiquitous and the credit unions can be hard to find and particularly for low income people, they can be very hard to even get to. And beyond that, back to the original question. Our banking system, just the entire banking system, up until the last 30 years, from the time of the great depression when the banks all failed and Roosevelt called a banking holiday. And then when he brought them back and he said okay guys, brand new set of rules. You know when you play Monopoly if you get Marvin Gardens and things you can just squeeze the rents out of people. But if you get one of the utilities, the railroads, the banks, you only make $100 every time you go around, it’s that or $200 or whatever it is. It’s absolutely predictable. It’s safe, boring and predictable. I want our banking system to be safe, boring and predictable. And I don’t understand why you think that our banking system should be part of the wild wild west of laissez faire free enterprise?

Dan Gainor: Well, banks are one of the most regulated commodities we’ve got out there. They’ve got government getting involved with currency…

Thom Hartmann: Nothing close to what it was before Gramm–Leach blew up, Gramm blew up Glass–Steagall.

Dan Gainor: Again, you’re all worried about the banks because oh well we’ve actually had some bank failures this year. We’ve had hardly any in comparison to what we had in the 80s.

Thom Hartmann: Because we’re pouring hundreds of billions of dollars at them.

Dan Gainor: Then what we should have done, because we do have rules to handle some bank failures, we should have let some of these banks fail.

Thom Hartmann: I absolutely agree with you on that. But the point is that they wouldn’t have gotten in the position to fail if we hadn’t had 30 years of Reaganomics. If Bill Clinton hadn’t signed on…

Dan Gainor: No, the reason why they’re in a position to fail is because government intervenes. When government intervenes…

Thom Hartmann: No it was when government backed off that the bank went in the tank, Dan.

Dan Gainor: Firms know that they’re going to be bailed out, like Fannie Mae and Freddy Mac, knew that they would be bailed out. Government sponsored entities, they knew they could do whatever they wanted.

Thom Hartmann: You are, A: you’re changing the topic. I’m not going to, we’re not going to talk about Fannie Mae and Freddie Mac. I’m talking about our banking system. Why can’t our banking system be, you know, the guys in the green eye shades that make the nice predictable income and they’ve got a pension and they’ve got a career. Instead, I go into my bank and I’ve got minimum wage employees who half the time don’t even know what they’re… The other day I had a two party check. You know, a check made out to somebody else who on the back had signed it over to me. And the clerk in the bank didn’t know what that was or how to handle it. I mean that’s how bad customer service has gotten.

Dan Gainor: I have a great solution for you. Pick a better bank. There are a lot of banks.

Thom Hartmann: It’s the only bank within a mile and a half of me, it’s the only bank I can walk to.

Dan Gainor: OK, well then complain to the boss about the fact that they do a lousy job.

Thom Hartmann: No, I want to complain to my elected officials and say bring back our banks as regulated institutions that help lubricate the business of America rather than skimming all the cream off the top.

Dan Gainor: You want to get government involved in regulating banks because you get lousy customer service?

Thom Hartmann: You know from 1936…

Dan Gainor: What’s next, you’re going to go after McDonalds? Because you don’t like the way they serve you your big mac?

Thom Hartmann: No, no. I’m talking about banks. Dan, from 1935 until the 1980s, with the S&Ls. When the S&Ls were deregulated under Reagan, boom, they fell apart. But from the, and into the 1990s. From 1935 until that time. That was the first time in the history of this country that we’ve gone more than 14 years without a banking panic. Why? Because FDR regulated the banks.

Dan Gainor: I am old enough to remember bad customer service from banks back in the 70s as well. Like I said, if you’re only willing to walk to your bank, then you’ve got a different issue. That’s not, that’s like using a neutron bomb to kill a gnat.

Thom Hartmann: Well I’ll give you that, Dan. I do need to get to a credit union and quick. Dan Gainor. Thanks Dan.

Dan Gainor: Thank you.

Thom Hartmann: Good talking with you.


Thom Hartmann: And welcome back, Thom Hartmann here with you. This is the uh, the report, it was released by the Non Profit Center for Responsible Lending. Banks and credit unions profited a whopping 24 billion dollars in overdraft fees in 2008, a 35% increase from 2006. 51 million people were hit with the fees. That’s 1 in 6 Americans. And why? Because ever since banking deregulation, the banks have gone from being a public utility basically, to just another business that’s out there to make as much money as it can.

You know, what’s the big picture here? I mean, the really big picture. The really big picture is that when Jefferson said banks can be more dangerous than standing armies, he was right. We’ve had a couple of attempts in the United states. We had one during the Lincoln Administration, we had one during the Kennedy Administration, when the government actually, the Treasury actually issued US notes, actually issued its own money. Where, instead of it being, you know, issued by the Federal Reserve, or by private banks, and it was a good thing. It worked for the country. The greenback under Lincoln, the United States note under Kennedy and Johnson. All gone now. And the trade out that Franklin Roosevelt, you know, in 1913, the Fed came along long before Roosevelt was in power. The trade out that Roosevelt made was he, okay, we’re going to keep the Fed in place. We’re going to keep our banking system in place. Although he did shut them all down, we had a banking holiday, he just closed the whole damn thing, he said, ‘That’s it! Now we’re going to reboot the system. And we’re going to say that the banks are public utilities.’

We’ve got now banks being bought and sold, mergers and acquisitions. We’ve got banks that are owned by foreign corporations, we’ve got banks that are owned by foreigners. We’ve got, you know, some of our largest banks in the United States are owned in large part by Saudi Arabia and China and investors thereof. All of this is crazy. I’m not absolutely opposed to a bank being a publicly traded corporation, but it needs to be one that is so tightly regulated that we never again have to pour a trillion dollars, and maybe as much as 9 trillion dollars, into the banks to keep them alive. Our banks, because of the deregulation of Phil and Wendy Gramm. Remember Wendy? She was on the board of Enron and she passed through the Commodities Future Trading Modernization Act so that Enron could make a fortune? And kill their employees basically? Actually some of their employees died, they committed suicide, I mean it was just a disaster. Thanks a lot Wendy Gramm. And then Phil Gramm, as a United States senator pushed in as a lobbyist, pushed through the Gramm-Leach-Bliley Act that blew up Glass–Steagall.

Glass–Steagall was a law that was put into place, back in the ‘30s, by Franklin Roosevelt, President Roosevelt, in the democratic congress, that said a bank has to be a bank. A bank cannot be a gambling house. You want to have a gambling house, you call it a brokerage. You call it a brokerage firm, or you call it something else. You call it a gambling house, you call it an investment house. Or you could even call it an investment bank if you want to sound really slick. But a bank doesn’t play with money. It doesn’t invest money, it doesn’t hope to make big profits on money, it doesn’t gamble with money. A bank takes in deposits, loans out money, issues mortgages, doesn’t resell those mortgages in secondary markets, and then buy insurance and then traunch them up and then slice and dice them and sell them to millions of people all over the world as big investments. All of that stuff should not be being done by banks.

Banks should be a public utility. They should be a public trust. This is a very straightforward process, or way of thinking of this is that our banks need to be answerable to us and our banks, it’s, you know, it gets back to the issue of the commons. The commons is that stuff that we can’t live without. We all need to breathe clean air, we all need to drink fresh water, we all need to know that our food is safe, we all need access to medical care, we all need an education. These are the core commons things. We need public roads that we can travel on, we need police and fire. These are the proper areas of government. I would argue frankly that banking is a proper area of government, but I’m not going to go that far in this rant. But simply to say that, the heavy regulation of our banks is a proper area of government. You know, how much money has Canada spent bailing out their banks? Canada, where the banks are very highly regulated. Zero. Not a dollar, not a dime, zip, nada. Most of the countries of the world have not spent any money bailing out their banks.

Whose banks have been bailed out? The United States and the United Kingdom. What were the two countries that were hit by Reaganomics and Thatchernomics? This wacky notion that 'well, you know, we’ll just deregulate everything and everything will be fine'. The United States and the United Kingdom. We’ve got a serious problem in these two countries, a serious problem in these two countries. And the way to solve this problem is to say we’re going to tightly regulate the way that banks act. We’re going to go back to those rules. It is absolutely true what I was saying,I mean, look it up, from the founding of this country, even when we were operating under the Articles of Confederation, before the Constitution, after the end of the revolutionary war, from the founding of this country until the 1930s, we never went more than 15 years without a bank panic.

In two of my books, I think in "Threshold", I’m pretty sure it’s in "Threshold", and I know it’s also in "Unequal Protection", I tell the story of how Abraham Lincoln got a paycheck, a rather large paycheck, for a job that he did. Went to the bank, cashed it, and turned it into cash. And it was a good thing he did because three days later it was the biggest bank panic of his lifetime. And all, and 30 of the banks in the area where he lived in Illinois went out of business, everybody lost everything. We never went more than 15 years without a banking panic in the entire history of this country until after Franklin Roosevelt passed the Glass–Steagall Act in 1935 or 36.

And from Glass–Steagall, from the heavy regulation of the banks, up until well up until the late 1990s, when the banks were deregulated, we didn’t have any banking panics. Now in the 1980s, the S&Ls were deregulated under the Reagan Administration, he couldn’t deregulate the entire banking system the way he wanted, so he just did the S&Ls. 'Oh, let’s turn the S&Ls into a cauldron of democracy'. Right, that worked real well. That one cost the American taxpayer 400 billion dollars. This one is costing us somewhere between 1 and 7 trillion dollars.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.

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