Wealth gap

One of the more serious economic problems facing the country is the rising income and wealth gap between the rich and poor. There are a number of reasons for this and campaign contributions and lobbyist are among the most important. These elements cause elected officials to interfere with the free market. One example was the repeal of the Glass/Steagall in 1999. After the economic collapse in the Great Depression several laws were passed to rein in the excesses and Glass/Steagall was one of those laws. It said that banks must keep their customer deposits separate from their investments. There would be two departments in the bank. The first would use customer deposits to make loans to other customer. The second would invest the bank profits earned from the loans. There would be no communication between these two departments. This meant that the personal loans to customers would be safe from any investment risk. This also meant that the loans the bank made would stay with the bank so they would carefully check out the credit worthiness of loan applicants. Pressure was put on congress by promises of campaign funds and lobbyist and Glass/Steagall was repealed and this allowed banks to invest customer money in more risky investment. The banks began to invest in derivatives which were not as heavily regulated allowing them to use higher risk/return investments. This lead to the mortgage crisis of 2006. The Fed is the lobbyist for the commercial banking system which means the fox is guarding the hen house.