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Glass-Steagall means that U.S. commercial banks, whose federal charters allow them to take deposits and make commercial loans, can't diversify into such financial services as insurance and underwriting. They also can't invest directly in companies, as Japanese banks have done with great success. Banks are feeling the hot breath of competition from such financial giants as American Express and Sears, Roebuck, which aren't hampered by Glass-Steagall. Their one-stop shops are taking more and more business away from banks. Sears, for example, owns a brokerage house (Dean Witter), sells insurance (Allstate), offers a national credit card (Discover), and sells real estate (Coldwell Banker).
It even takes deposits through so-called nonbank banks that don't make commercial loans.
And as if domestic competition weren't enough, banks have the Japanese to worry about. In 1970, seven U.S. banks were among the world's 25 largest; now only three make the list, compared to 13 Japanese banks. The Japan-based Sumitomo Bank, for example, has agreed to buy a large stake in the investment banking house Goldman Sachs; such a purchase would be illegal for U.S. banks, which aren't allowed to buy securities firms.
"We can't do business today with yesterday's regulations and expect to be in business tomorrow," Joseph Pinola, chairman of California's First Interstate Bancorp recently told the Miami Herald. "Unless we somehow get our act together legislatively, we are going to continue to suffer."
Help may come from the Reagan administration's Task Force on Regulatory Relief, chaired by Vice-President George Bush. But if that doesn't work, there's always a do-it-yourself option.
Thomas Labrecque, president of Chase Manhattan, flabbergasted his fellow bankers at their 1986 convention when he suggested that banks might just have to drop out of the bank system, becoming nonbank banks themselves. At a posh reception hosted by Chase, the Miami Herald reported, Labrecque told the crowd, "We either get change or people are going to have to look at giving up their bank charter."
Next thing you know, they'll be wondering why they need a charter in the first place.
Conservative Organ Pipes Up Against the Drug War
Amidst the huffing and puffing of the war on drugs, liberty seems to have gained some friends in unusual places. Most encouraging to opponents of the government's futile prohibition was a December cover story in National Review, the largest circulation conservative journal in the land (and reportedly one of President Reagan's favorites). Although NR founder William F. Buckley has lately called for legalizing heretofore illegal substances, free-lancer Richard C. Cowan's "A War Against Ourselves: How the Narcs Created Crack," accompanied by Richard Vigilante's "Reaganites at Risk," nevertheless came as a pleasant surprise.
Cowan used elemental economic analysis of the sort one would presume the Adam Smith tiewearers of the Reagan administration are familiar with to show why "the government itself has been one of the most potent causes" of the drug problem. Not only does prohibition enable organized crime to control the drug business, noted Cowan, but it actually encourages the substitution of harder, more dangerous drugs for less potent ones like marijuana.
Because marijuana is bulky to transport, thus increasing the chance of arrest, drug traffickers are turning to contraband that is more easily concealed. And, wrote Cowan, by concentrating their efforts on relatively harmless marijuana-more than half of all drug busts are for marijuana possession-the narcotics bureaucrats may actually be pushing people toward harder drugs.
Often lost in the hysteria surrounding the war on drugs is the extent to which the government is violating the fundamental American rights that our forefathers took for granted. Declared Cowan: "The existing and proposed laws constitute the basic elements of a socialist police state. There are already controls on cash and capital transfers, calls for the canceling of hundred dollar bills, violations of the longstanding principle of lawyer-client confidentiality, and the authority to seize the accused's property before a trial or even after acquittal."
Few conservatives are yet willing to echo Cowan's argument in public. As Richard Vigilante noted in the same issue of National Review, "Most conservative politicians have behaved irresponsibly on the drug issue, panicking in the face of a media-created crisis, attempting to expand government powers to do for the reckless what they might refuse to do for the poor: protect them from themselves." An exception, he noted, is Republican Phil Crane (Ill.), who joined 15 liberal Democrats in voting against the House's profligate and statist antidrug bill last Congress.
The drug war, Vigilante warned NR's conservative readers, "violates not merely the abstract symbols of civil liberties beloved of left-wing intellectuals; it violates genuinely important rights in ways Americans have not in the past been disposed to tolerate." Baby boomers in particular are not likely "to tolerate in their thirties and forties harassment they rejected in their teens and twenties," yet such harassment and punishment of casual users is inevitable if the war on drugs is to succeed.
If the government persists in the costly and pernicious war on drugs, Cowan predicted, "we are not going to be drug-free, just unfree. " National Review's willingness to provide a forum for the conservative case against prohibition may someday be seen as a landmark on a different path.