Molly Ivins October 26

AUSTIN, Texas — I feel vaguely like Henry Higgins in "My Fair Lady," announcing with gleefully inhumane relish: "She'll regret it, she'll regret it! Ha!"

"I can see her now, Mrs. Freddy Eynsford-Hill, in a wretched little flat above the store!

"I can see her now, not a penny in the till, and the bill collectors knocking at the door!"

Which is to say, the new banking bill is a thoroughly lousy idea, and the party most likely to regret it is us.

The 1999 Gramm-Leach Act is about to replace the 1933 Glass-Steagall Act, with the result that bankers, brokers and insurance companies can all get into one another's business. It's a done deal except for the final vote on the conference-committee agreement. The inevitable result will be a wave of mergers creating gigantic financial entities.

In a stupefying moment of pomposity, a New York Times editorial solemnly concluded: "The principle of freer competition is the economic engine of this era. But the other imperative is to demand openness, financial prudence and safeguards so that the vast new concentrations of wealth and power do not create new abuses." When was the last time you saw a vast concentration of wealth and power that DIDN'T create abuses?

Or as Sen. Richard Bryan of Nevada so neatly put it, "Industry has gotten a gold mine while the American public has gotten the shaft."

Just to remind you one more time of how corrupt our political system is (and members of the Senate had a cow when Sen. John McCain used the word "corrupt" to describe the campaign-financing system a few weeks ago), the financial industry has poured more than $30 million in soft money, PAC and individual contributions to politicians in 1999, 60 percent to the Republicans. That's just over one-third of the amount spent during the entire 1997-98 election cycle, according to the Center for Responsive Politics.

And this certainly qualifies as responsive politics. So much money has gone into getting this bill passed during the last 10 years that there is no hope of stopping it.

The only thing that held it up this long was Sen. Phil Gramm's stubborn insistence on making it worse. He wanted to use the occasion to gut the Community Reinvestment Act of 1977, which forces banks to make loans in the same area where they take in deposits — in other words, to quit red-lining their own customers. Most of CRA was saved by the White House.

But the bad news is:

— Privacy: What's in the bill doesn't protect your financial privacy worth a rat's heinie. In theory, the new law says that banks have to disclose their privacy policies. That doesn't mean they always have to protect your privacy, or give you an opt-out before selling your information to every telemarketer on earth.

Ever use a check at a liquor store? Do you smoke? Ever put something from Victoria's Secret on your credit card? Take any meds? Ever see a shrink? (Actually, that's increasingly less likely under our dandy system of corporate HMO health care.) The health information you provided to your life insurer will be passed along to your banker when you go to get a mortgage and will help determine the interest rate you get charged, as will your lifestyle info.

— Natural disaster: In theory, banks that merge with insurance companies are obliged to put themselves at only limited risk if some catastrophic event threatens their insurance subsidiary.

What's the only business in the world that takes global warming seriously? Insurance.

We just watched a third of North Carolina go under water. All the global warming experts think that increased hurricanes are one consequence of the phenomenon: One Mitch slams straight into Miami or Savannah, and the entire industry will stagger. Think it won't affect the banks that own it?

— Unnatural disaster: Don't get me started on the evidence for my theory that bankers are among the stupidest people on God's green earth. These are the geniuses who loaned all that money to Latin America in the '80s and then had to write it off. This is the system that almost collapsed last year because one hedge fund spiraled out of control — and had to be bailed out by the Fed. These are the clever fellows who didn't notice their banks were being used to launder Russian mafia money.

"Too Big to Fail" will be the new order of the day. And guess who gets left holding the bag when they're too big to fail? One of these monsters goes down, and it will cost as much as the whole S&L debacle.

Alan Greenspan, not heretofore associated with the populist left, told bankers in a speech two weeks ago that the bill will create a class of super-institutions Too Big to Fail. In his usual impenetrable linguistic style, he allowed as how some new form of supervision will have to be created, but the regulators are well behind the financial system.

— Consumers: Phil Gramm promises us that increased competition will bring about a wonderful world of dandy new services at lower prices. Not a single soul thinks this bill will do anything but cause a tidal wave of mergers and acquisitions, leaving us with fewer options than ever. We'll get fewer and more powerful institutions with the ability to overcharge for products because of their market share.

Ed Mierzwinkski of Public Interest Research says the only customers whom banks care about are other banks' customers. The only offers you get for those 3 percent APR credit cards come from other banks. Once you sign up, the banks suddenly announce that the offer is time-limited.

— Most obscure horrible provision in bill: Rep. Thomas Bliley of Virginia stuck in a $95 billion give-away for insurance. The trend in that industry is "de-mutualization," a mutual being a entity where the rate-payers own the company. If the company "de-mutualizes" by going to a stockholder-owned mutual holding company, without compensation to the policy-holder owners, the increased value of the company goes not to the former owners but to execs with big stock options and new shareholders. The former owners lose equity of an average $1,700 each, according to the Center for Insurance Research in Cambridge, Mass.

Twenty-seven states have either rejected or have not enacted mutual holding company conversion laws. Hiya, sucker.

Molly Ivins is a columnist for the Fort Worth Star-Telegram. To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

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