Posted by
Always To The Right on Wednesday, October 01, 2008 1:02:52 PM
Democrats have tried to cast blame for the credit-sector meltdown on
deregulation, and point to the repeal of the Glass-Steagall Act as the
linchpin. The repeal came in 1999, though, and it did nothing to cause
the real cancer at the heart of the crisis: wildly overvalued
mortgage-backed securities issued by Fannie Mae and Freddie Mac. If
Democrats don’t believe that, they can ask one of their own:
A running cliché of the political left and the press
corps these days is that our current financial problems all flow from
Congress’s 1999 decision to repeal the Glass-Steagall Act of 1933 that
separated commercial and investment banking. Barack Obama has been
selling this line every day. Bill Clinton signed that “deregulation”
bill into law, and he knows better.
In BusinessWeek.com, Maria Bartiromo reports that she asked the
former President last week whether he regretted signing that
legislation. Mr. Clinton’s reply: “No, because it wasn’t a complete
deregulation at all. We still have heavy regulations and insurance on
bank deposits, requirements on banks for capital and for disclosure. I
thought at the time that it might lead to more stable investments and a
reduced pressure on Wall Street to produce quarterly profits that were
always bigger than the previous quarter.
“But I have really thought about this a lot. I don’t see that
signing that bill had anything to do with the current crisis. Indeed,
one of the things that has helped stabilize the current situation as
much as it has is the purchase of Merrill Lynch by Bank of America,
which was much smoother than it would have been if I hadn’t signed that
bill.”
In fact, the repeal made it possible to rescue depositors from the
collapse of banks and protect FDIC funding, keeping taxpayers from
footing the bill for the collapse. And the repeal was no partisan
project, either; it passed 90-8. Thirty-eight Democrats in the Senate
voted for the repeal, including Barack Obama’s running mate, Joe Biden,
as well as Chuck Schumer, John Edwards, Chris Dodd, John Kerry, Joe
Lieberman, and others. In other words, a Democratic President signed
it, and it had the support of members of every Democratic ticket since then — including Obama’s.
Obama wants to blame Republicans for transparent political
purposes. Phill Gramm wrote the bill, and Gramm has been an adviser to
John McCain. That makes this a convenient target for the Democrats,
but Clinton won’t play along with it. He insists that the repeal of
Glass-Steagall was something he supported on his own, and that it had
nothing to do with the financial crisis we see now.