Elizabeth Warren DESTROYS

Here she is, making the case for the reintroduction of Glass-Steagall. She knows her history, and she knows how to wallop the plutocratically-purchased pundits who try to confuse the audience with faux-history.

In the above clip, one of those pundits argues that the failure of Continental of Illinois in the 1980s means that Glass-Steagall was ineffective -- so, hey, let's not even try to regulate the banks, because regulation doesn't work. Warren rightfully points out the fact that New Deal banking regulation had created fifty years of serene, uneventful banking in this country, compared to the preceding long, long history of boom/bust/boom/bust.

She's right, of course -- but the matter goes deeper. Let's talk about Continental.

It was rumored to be a mobbed-up bank, sort of like the one the Joker rips off at the beginning of The Dark Knight. A further set of rumors tied Continental in with the Vatican banking scandal, which has been the subject of a number of books that don't always make sense.

But we don't need to traffic in rumors to understand what went wrong. It's simple. The bank got "greedy" -- that was the word used by one of its chief executives -- and made dangerously large investments in energy at a time of falling oil prices. Executive John Lytle received sizable kickbacks when he arranged for the bank to hand out massive, iffy loans to energy concerns.

In 1984, the financial earthquake hit. Rumors of a forced sale led to a run on the bank, which led, in turn, to government intervention. Yes, Continental was the first bank deemed "too big to fail"; the term originated at that time.

Uncle Sam owned the bank for the next ten years, until it was sold to B of A. Such a move would now be deemed socialism. I guess that makes Ronald Reagan a socialist.

By the way: John Lytle went to jail. That's another difference between the 1980s and our own era.

The Lytle conviction underlines an important truth: Continental's failure was not due to regulation, and not in spite of regulations. The failure occurred because regulations were broken. If you argue that Continental proved the uselessness of banking laws, you might as well argue that Ted Bundy proved the uselessness of laws against homicide.