One of Barack Obama's biggest lines, which he repeats at every campaign event and delivered in Tuesday night's Town Hall Debate in Nashville, is that the Wall Street financial crisis was created by deregulation - deregulation, he hastens to add, is the policy of George W. Bush, John McCain and the Republicans.
He made the charge in response to the first question in the debate (transcript) last night:
And I believe this is a final verdict on the failed economic policies of the last eight years, strongly promoted by President Bush and supported by Sen. McCain, that essentially said that we should strip away regulations, consumer protections, let the market run wild, and prosperity would rain down on all of us.
Strip away regulations? Apparently Obama wants you to forget about Sarbanes-Oxley. Here's how Wikipedia describes Sarbanes-Oxley:
The legislation establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms. It does not apply to privately held companies. The Act contains 11 titles, or sections, ranging from additional Corporate Board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Debate continues over the perceived benefits and costs of SOX. Supporters contend that the legislation was necessary and has played a useful role in restoring public confidence in the nation's capital markets by, among other things, strengthening corporate accounting controls. Opponents of the bill claim that it has reduced America's international competitive edge against foreign financial service providers, claiming that SOX has introduced an overly complex and regulatory environment into U.S. financial markets.
The Bush administration and a Republican-controlled Congress pass Sarbanes-Oxley in 2002, in response to the last Wall Street crisis - Enron, WorldCom, Adelphia, Tyco, etc - with overwhelming Democrat support - it passed the House 423-3 and the Senate 99-0, with McCain voting for it. Obama was still in the Illinois state Senate, voting "present."
Sarbanes-Oxkley included a new accounting rule, called "Mark to Market," which is now widely viewed as having contributed to the subprime mortgage crisis. "Mark to Market" is being suspended as part of the legislation authorizing the $700 billion Wall Street bailout.
Obama has it completely backwards on deregulation and the economic crisis. Too much wrong-headed regulatory policy designed to encourage sub-prime lending, including the Community Reinvestment Act as written by Democrats and rewritten by the Clinton administration, combined with the Democrats' rejection of proposals from the Bush administration and from John McCain to reform and reign in Fannie Mae and Freddie Mac, are at the root of the current crisis.
The media lets Obama push the false deregulation meme, even after McCain pointed out Obama's record of failure on Fannie and Freddie during the debate:
But you know, one of the real catalysts, really the match that lit this fire was Fannie Mae and Freddie Mac. I'll bet you, you may never even have heard of them before this crisis.
But you know, they're the ones that, with the encouragement of Sen. Obama and his cronies and his friends in Washington, that went out and made all these risky loans, gave them to people that could never afford to pay back.
And you know, there were some of us that stood up two years ago and said we've got to enact legislation to fix this. We've got to stop this greed and excess.
Meanwhile, the Democrats in the Senate and some -- and some members of Congress defended what Fannie and Freddie were doing. They resisted any change.
Meanwhile, they were getting all kinds of money in campaign contributions. Sen. Obama was the second highest recipient of Fannie Mae and Freddie Mac money in history -- in history.
So this rescue package means that we will stabilize markets, we will shore up these institutions. But it's not enough. That's why we're going to have to go out into the housing market and we're going to have to buy up these bad loans and we're going to have to stabilize home values, and that way, Americans, like Alan, can realize the American dream and stay in their home.
But Fannie and Freddie were the catalysts, the match that started this forest fire. There were some of us -- there were some of us that stood up against it. There were others who took a hike.
Obama's response during the debate: He said he once wrote a letter and gave a speech urging reform of Fannie and Freddie:
[T]wo years ago, I said that we've got a sub-prime lending crisis that has to be dealt with.
I wrote to Secretary Paulson, I wrote to Federal Reserve Chairman [Ben] Bernanke, and told them this is something we have to deal with, and nobody did anything about it.
A year ago, I went to Wall Street and said we've got to reregulate, and nothing happened.
Obama wrote a letter. Obama gave a speech. But Obama did not author or sponsor legislation to fix the problem. He took no action in the U.S. Senate to address the issue legislatively.
He wrote a letter. He gave a speech. And in his own words, "nobody did anything about it."
The MSM loves Obama's speeches. They give him a pass on truthfulness. And they give him a pass on backing his talk with action. Obama said he foresaw crisis so he wrote a letter and gave a speech but he authored no legislation.
In the last few years, Barack Obama has found time to write two books about himself but no time to author significant legislation even when, he says, he foresaw the coming subprime mortgage crisis.
Obama gives a good speech about change and what he would do if given the chance to act. Well, the voters of Illinois gave him that chance four years ago to bring about change by sending him to the U.S. Senate. He wrote a letter. And gave a speech. And then did nothing.
While the American media gives Obama a pass for both his lie about deregulation and his inaction beyond a letter and a speech, James Antle at London's Guardian, pointed it out in his column today:
Prediction: The American media will continue to ignore the falsity of Obama's deregulation claim and pretend Sarbanes-Oxley never happened, at least until McCain himself debunks it, which McCain failed to do last night. McCain didn't do his job, but that's no excuse for the media failing in its own duty to inform the American public of the truth.
Update: U.S. Sen. Mitch McConnell's office issued a statement regarding Obama's false claim regarding deregulation:
As the financial crisis continues, Democrats in Congress have become quite enamored with the tactic of trying to point fingers at their latest bogeyman, deregulation. Their narrative is that it’s been one long decade of GOP attempts to remove oversight and government involvement. But is this really a compelling argument?
To begin with, many Democrats voted for these very policies they are now decrying. Indeed, Maria Bartiromo asked former President Bill Clinton about the now-vilified Gramm-Leach-Bliley bill, which he signed in 1999 and Clinton said, “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.”
And it’s important to recall that a great deal of regulation remained. In his column for The Washington Post Monday, Sebastian Mallaby noted that the banks that bought bad mortgage products were all subject to regulation by the SEC. Not only that, The Examiner reminds Democrats that in fact Congress passed strict new corporate regulations in 2002, known as Sarbanes-Oxley.
While Democrats may enjoy their usual demagoguery of Republicans and markets, Americans would be wise to remember a bit of history in evaluating this rhetoric.
They'd be more likely to remember it if the mainstream media - and McCain - would remind them.