The US financial regulatory agencies have weakened banking rules.



Then in late May, Congress voted to weaken them even further.



They went after the Volcker Rule which prohibits banks from making risky investments with depositors' money.

The Volcker Rule is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which then President Barack Obama signed in 2010 into law after the last crash. It was a response to what was considered the leading causes of the crash, the banks' part in it, the banks' failures, and the necessity for the massive bailout.

Congress also voted to change the threshold of "too big to fail" - those financial institutions which are deemed important to the system and which have to be put under stricter regulations.

Previously, the threshold was at $50bn in assets, which put 35 banks on the list. The new threshold is $250bn, with only 10 banks that make the list.

The bankers argue that Dodd-Frank "has impeded the efficient operation of the financial system, driving banks away from providing services valued by their customers, reducing competition in affected markets, and overall acting as a drag on the economy". Yet, banks have done fabulously well after they were rescued and since the regulations were introduced. Their profits are at record levels.

Of course, they say that the changes are necessary to help the "small community banks," suffering under the weight of regulations. Of course, the data contradicts that. Earnings of community banks are up and they make business loans at twice the rate of non-community banks.

We've seen this movie before.

After the crash of 1929, banks started failing en masse. It should be noted that before the crash, there was little regulation and less enforcement, and through the 1920s, an average of 600 banks a year went under. Then came the "New Deal". It launched an immediate rescue of the banks and added a host of regulations. Bank failures virtually disappeared from the late 1930s until 1980. During most of those years, the number of bank failures was in the single digits.

In the early 1980s, however, one sector of the banking system, in particular, was deregulated - savings and loans. These were actually the kind of local, community banks depicted in the movie, "It's A Wonderful Life". They were small, boring, and very safe. With deregulation, savings and loans were suddenly given a license to steal. The owners of the banks were not stealing from the banks, they were using the banks - with their respectability, their institutional and political clout, and their staffs - to do the stealing.

Out of 3,234 savings and loans associations, 1,043 went under between 1986 and 1995. Almost every bank that collapsed or had to be closed, had engaged in frauds. The amount of fraud involved in the Crash of 2008 was probably the same.

But while more than 800 people have been convicted of fraud related to the savings and loans crisis, the number of criminal convictions was almost non-existent following the 2008 crash. Not because there was less crime, but due to cultural changes in prosecutors' offices and legal changes coming from a very pro-business Supreme Court.

The savings and loans losses were valued at $519bn, back when that was considered serious money. A bailout of $480bn was necessary.

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During the Bush administration once again, banking rules and their enforcement were relaxed and the 2008 financial meltdown followed.

More tax cuts, fewer Harley Davidson bikes

Trump's deregulation push is also accompanied by sweeping tax cuts. The major effect of the tax cuts is always for the rich. That pumps more money into the hands of the investor class. This creates a problem.

Events at Harley-Davidson that took place just as the Senate was passing their bill are the perfect illustration.

Donald Trump had praised it - "Harley-Davidson is a true American icon, one of the greats ... Thank you, Harley-Davidson, for building things in America." - and promised policies that would help them - "And I think you're going to even expand." Speaker of the House Paul Ryan told their workers, and the rest of us, that the tax cuts would put "American companies like Harley-Davidson on a much better footing to compete in the global economy and keep jobs in America." It's a successful company. Its pre-tax profits are $800m to a billion a year. Trump's tax billwill be saving them about $100m a year.

What did they do in response? They spent $696m on a stock buyback and raised their dividends. Stock buybacks are a weird beast. They do push share prices up. But only because more money is going after the shares. Top management of most companies get a lot of their compensation based on share price. They make out very well. The stockholders do well. But they produce nothing. In fact, they take money out of the company just to inflate the share price.

On May 22, they announced they were closing a factory. Eight hundred workers were abruptly told they were losing their jobs. Another factory will increase production, making the net loss just 350 jobs. Though the company will use more part-timers and pay lower wages, too.

Harley is selling fewer bikes in the US. The reason is that the great mass of people, the bottom 90 percent, are making less money, especially the kind of people who buy motorcycles. Therefore, Harley Davidson cannot sell more products in the US.

Deregulation for the rich

This is emblematic of the whole system. Yes, investors have more money. No, they can't invest it in productive ways, because consumers can't consume any more. They're tapped out. What are the investors going to do? Stop investing? No. Using money to make more money is so logical that it's practically a compulsion.

Investment necessarily shifts to "financial products". The banks and other financial institutions see all that money around and see investors wanting to buy something. They have a problem. On the one side, there are companies that simply can't make more products to sell because, in the aggregate, not much more can be bought.

On the other side, there are rules to stop them from selling things that are too high risk, or that make no sense, or that essentially require fraudulent representation to get anyone to buy them. They can't change the economy. They don't really want to.

The idea of working people making more money, and themselves, perhaps less, has zero appeal. The only thing left to do is change the rules. They know perfectly well they can enrich themselves selling rubbish. If they bring the house down, someone else will pay the cost. Hence, they push for deregulation which eventually will bring down the financial sector, as has happened before.

According to President Ronald Reagan, the bill that deregulated the savings and loans in 1982, was "the most important legislation for financial institutions in 50 years ... I think we've hit the jackpot."

According to Congressman Jeb Hensarling, the new one "is the most pro-growth banking bill in a generation. Today is an important day in the history of economic opportunity in America".

According to Yogi Berra, "It's deja vu all over again".