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On Our Financial Crisis: The "It's All the Republicans' Fault" Myth

I’ve heard it one too many times now to keep my mouth shut: the line that the current financial mess is all the Republican Party’s fault:

With our government hemorraging money, our economy in shambles because of the greed and malfeance of elected officials and big business alike. The republican party of the 21st century has shown that they can not be trusted to govern for the good of the country and the people, unless of course you are rich and a major contributor.

The democrats are not much better, but face it, this mess started and was exacerbated under a republican controlled congress, then made infinitely worse by a republican administration.

The thing is, I have a memory that works some of the time, and I remember that this mess started during the administration of Bill Clinton.

Let’s check my memory a bit. On banking deregulation, 1999, the New York Times:

The Clinton Administration and top Republican lawmakers reached an agreement early Friday to overhaul the financial system, repealing Depression-era laws that have restricted the banking, securities and insurance industries from expanding into one another’s businesses.

The deal was announced about 2 A.M. after a compromise was reached over the measure’s effect on lending rules for the disadvantaged, the source of months of partisan bickering between the White House and Senator Phil Gramm, the Texas Republican who heads the banking committee.

It concludes decades of attempts to rewrite banking laws to catch up with a marketplace that has already experienced broad consolidations and the rise of financial conglomerates offering bank and brokerage accounts as well as insurance….

White House officials withheld final approval of the agreement until aides could see the measure’s language. But the officials indicated Friday night that, with broad support from Democrats in Congress, the measure was all but certain to be signed by President Clinton. As such, it will be one of the most significant pieces of legislation to be written by the White House and the 106th Congress, which began its term considering whether to remove Clinton and has had a bitter relationship ever since.

“When this potentially historic agreement is finalized,” Clinton said in a statement, “it will strengthen the economy and help consumers, communities and businesses across America.”

Treasury Secretary Lawrence H. Summers said in an interview, “At the end of the 20th century, we will at last be replacing an archaic set of restrictions with a legislative foundation for a 21st-century financial system.” The measure, he added, “would provide significant benefits to the national economy.”…

The breakthrough in Friday’s legislation came in a backroom meeting at the Capitol soon after midnight, when a group of moderate Senate Democrats — led by Christopher Dodd of Connecticut and Charles E. Schumer of New York — forced a compromise between Gramm and the White House over the legislation’s effect on the Community Reinvestment Act, a 1977 anti-discrimination law intended to encourage lending to minorities and others historically denied access to credit.

Dodd, whose state is home to the nation’s largest insurance companies, and Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act.

Chris Dodd. Chuck Schumer. Lawrence Summers. Bill Clinton. Wait a minute. They’re not Republicans.

The Gramm-Leach-Bliley Act was agreed to by the Senate by a 90-8 margin (Harry Reid and Joe Biden voted for the legislation; John McCain didn’t show up to vote), and in the House by a 362-50 margin (Nancy Pelosi voted for it).

Who voted for the Commodity Futures Modernization Act, the bill that made the crazy derivatives market possible? In 2000, the House voted 377-4 (51 not voting) for it, with House Democrats (181-2) voting for it in roughly the same proportion as House Republicans (194-2). (Senators never directly voted for it, but included it as part of an omnibus spending bill that passed.)

And who was the president that pushed the federal government to get more poor people to buy homes? Bill Clinton — even though renting can make much more economic sense than owning.

As Election Day approaches, let’s resist the urge to take the Republican/Democrat divide and try to shove every other divide into its confines. It’s not all the Republicans’ fault. A very large number of Democrats are also to blame, and we should not be afraid to say so.

3 thoughts on “On Our Financial Crisis: The "It's All the Republicans' Fault" Myth”

  1. Roby Dickerson says:

    So nice to hear a fare commnet.


  2. Elle says:

    Well yes, the democrats have done their share to create the mess, as I did mention in the quote. But, and this is the big part of it, the deficit that is going to hang like a millstone around the neck of this country into our great great grandchildrens generation and beyond, was made that much worse under a republican administration.

    Also, some of the key pieces of legislation that helped lead to this mess was added to a budget bill that, if it hadn’t of passed, would have shut the government down and caused severe disruptions, something congress was loath to allow happen considering the mood of the voters at that time.

    Also, this was done under a republican controlled congress, republicans who pretty much decided what got brought up and voted on and what didn’t. Democrats, if they wanted to try to get something done for their constituents had to work with the republicans to get anything passed.

    the republicans also controlled key committees and could attach amendments to bills that had to get passed, like Phil Gramm did to the budget bill, that pretty much stripped away a lot of government oversight of the banking industry, oversight that could have prevented the bundling and selling of subprime mortgages as a form of high-risk investment intstument, as well as the misguided insurance policies offered as guarantees for these questionable securities to catch the interest of mutual fund managers and others.

    There is also just the general atmosphere that the republicans fostered in the capitol and beyond. The atmosphere that greed is a virtue, profits should be the sole yardstick when making any decision, and that trickle down and voodoo economics actually worked became prevalent. Also the mantra that the free market was the end all be all and could be self-regulating was also foisted off as sound fiscal policy.

    Yeah, the democrats pretty much went along with it, sometimes for their own shortsighted reasons, sometimes because they are just as venal, greedy, and morally corrupt as the republicans.

    Now I see it like it is in the military, the blame ultimately comes to rest on those who were in charge at the time. That was the republicans.

  3. Jon says:

    Jim, Many years ago, while I was working in R&D, a behind the doors engineer made the comment to me that political policy was the work of a small cabal of individuals within the Council of Foreign Relations and the Trilateral Commission. Being young I was intrigued by the idea of the conspiracy, though I never really put much credence in the idea.
    However as I age, and take a look at the actions of presidents from ideologically opposite spectrums, and how they overlap. I have begun to suspect some underlying conspiracy, I think it is just the conspiracy of stupidity.

    It really is nice to see that you recognize bad policy for what it is, regardless of political origin.

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