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Title: Deregulation Not to Blame for Financial Woes
Source:
[None]
URL Source: http://www.aei.org/article/28701
Published: Jun 10, 2011
Author: Peter Wallison
Post Date: 2011-06-10 21:44:39 by no gnu taxes
Keywords: None
Views: 148
Comments: 5
Barack Obama's claim that the financial crisis is due to Republican deregulation depends on ignoring several important facts. The Democrats are wrong in claiming that financial services deregulation is to blame for the current financial crisis--if anything, the financial sector has seen increased regulation since the savings and loan collapse in the 1980s. The lax supervision of Fannie Mae and Freddie Mac, which Republicans sought to strengthen in 2005, is the true culprit of this financial crisis. In the debate on September 26, Democratic presidential nominee Barack Obama argued that the current crisis in the financial markets is the result of Republican deregulation. The advertising from his campaign has been saying the same thing, and this claim is becoming a fixed element in the talking points of Democratic candidates this year. The credibility of the charge depends on ignoring several important facts: -- There has been a great deal of deregulation in our economy over the last 30 years, but none of it has been in the financial sector or has had anything to do with the current crisis. Almost all financial legislation, such as the Federal Deposit Insurance Corp. Improvement Act of 1991, adopted after the savings and loan collapse in the late 1980s, significantly tightened the regulation of banks. The repeal of portions of the Glass-Steagall Act in 1999--often cited by people who know nothing about that law--has no relevance whatsoever to the financial crisis, with one major exception: it permitted banks to be affiliated with firms that underwrite securities, and thus allowed Bank of America Corp. to acquire Merrill Lynch & Co. and JPMorgan Chase & Co. to buy Bear Stearns Cos. Both transactions saved the government the costs of a rescue and spared the market substantial additional turmoil. None of the investment banks that got into financial trouble, specifically Bear Stearns, Merrill Lynch, Lehman Brothers Holdings Inc., Morgan Stanley and Goldman Sachs Group Inc., were affiliated with commercial banks, and none were affected in any way by the repeal of Glass-Steagall. It is correct to say that there has been significant deregulation in the U.S. over the last 30 years, most of it under Republican auspices. But this deregulation--in long-distance telephone rates, air fares, securities-brokerage commissions, and trucking, to name just a few sectors of the economy where it occurred--has produced substantial competition and innovation, driving down consumer costs and producing vast improvements and efficiencies in our economy. The Internet, for example, wouldn't have been economically possible without the deregulation of data-transfer rates. Amazon.com Inc., one of the most popular Internet vendors, wouldn't have been viable without trucking deregulation. -- Republicans have favored financial regulation where it was necessary, as in the case of Fannie Mae and Freddie Mac, while the Democrats have opposed it. In 2005, the Senate Banking Committee, then under Republican control, adopted a tough regulatory bill for Fannie and Freddie over the unanimous opposition of committee Democrats. The opposition of the Democrats when the bill reached the full Senate made its enactment impossible. Barack Obama did nothing; John McCain endorsed the bill in a speech on the Senate floor. -- The subprime and other junk mortgages that Fannie and Freddie bought--and the market in these mortgages that their buying spawned--are the underlying cause of the financial crisis. These are the mortgages that the Treasury Department is asking for congressional authority to buy. If the Democrats had allowed the Fannie and Freddie reform legislation to become law in 2005, the entire financial crisis might have been avoided. Policies that center on deregulation are probably hard for the voting public to grasp, and that has allowed Democratic candidates to spread the idea that there is a connection between deregulation and the current crisis. But an Obama victory, based in part on the claim that deregulation has caused the financial crisis, will create a mandate for new regulation where it isn't necessary and will do harm to our economy.
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#1. To: no gnu taxes (#0)
You sound like a Marxist who disputes communism caused the collapse of the USSR.
"Keep Your Goddamn Government Hands Off My Medicare!" - Various Tea Party signs.
Earlier you posted this: http://libertysflame.com/cgi-bin/readart.cgi?ArtNum=21097&Disp=9#C9 which among other things, called for "With regard to Finance, (a) re-enact the old Glass-Steagall Act, effective January 20, 2014," So if regulation isn't to blame, then why are you backing more regulation? Once again, I have to wonder if you actually read what you post.
"Thats because your basically and idiot." Bullshit. That and an abdication by Bush of any sense of oversight or authority are tied at the hip to this crisis.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." "THE MILITIA IS COMING!!! THE MILITIA IS COMING!!!" Paddy is stupid. I used to believe that he's confused. Now I know that he's just plain old Boofer dumb.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." "THE MILITIA IS COMING!!! THE MILITIA IS COMING!!!" Is it necessary for me to agree with every single point in every thing I post? No.
Now, I know I’m not going to change the minds of any of the True Believers…those who read all of Reverend Al’s sermons, and say things like, “You know, global warming can mean warmer OR colder, wetter OR drier, cloudier OR sunnier, windier OR calmer, …”. Can I get an ‘amen’??
The Democrats are wrong in claiming that financial services deregulation is to blame for the current financial crisis--if anything, the financial sector has seen increased regulation since the savings and loan collapse in the 1980s. The lax supervision of Fannie Mae and Freddie Mac, which Republicans sought to strengthen in 2005, is the true culprit of this financial crisis.
#2. To: no gnu taxes (#1)
Barack Obama's claim that the financial crisis is due to Republican deregulation depends on ignoring several important facts.
Badeye posted on 2011-04-29 10:30:22 ET
#3. To: no gnu taxes (#0)
Deregulation Not to Blame for Financial Woes Source
--GW Bush
--Sarah Palin's version of "The Midnight Ride of Paul revere"
#4. To: go65 (#2)
--GW Bush
--Sarah Palin's version of "The Midnight Ride of Paul revere"
#5. To: go65 (#2)
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