During the presidential campaign, we constantly heard from Team Obama and the media (excuse the redundancy) was how Republican-inspired deregulation had let evil bankers and capitalists run roughshod over the economy and created the current credit mess.
Well, a lot of the deregulation was GOP-inspired, but that isn't what caused the situation that I like to refer to as The Great SUCKUP (The Seemingly Unlimited Cash Kitty Under Paulson).
What John Berlau has found at Reason Online is that the Clinton Administration loved 1990s financial deregulation so much that it cited it as a major accomplishment.
Berlau provides the proof:
..... when the credit crisis emerged as the top campaign issue, Sen. Barack Obama (D-Ill.) pounced on his opponent with two basic messages. One was to blame the policies of deregulation that Sen. John McCain (R-Ariz.) voted for. And the second was to hug former rivals Bill and Hillary Clinton as hard as he could and harken back to the prosperity and economic growth of the 1990s.
..... But now that he has won the presidency and must, as the cliché goes, shift from campaigning to governing, Obama and his economic team will have to face up to a paradox that most of the media overlooked during the campaign. Namely, the Obama campaign's twin messages of bashing deregulation and embracing the Clinton years were inherently contradictory. Bill Clinton signed nearly every deregulatory measure that John McCain backed—the same measures that are now being blamed (wrongly) for helping cause the current crisis. What's more, Clinton administration officials have credited these policies for contributing to the ‘90s economic boom—the very "shared prosperity" that Obama says he wants to go back to.
Late in Clinton's tenure, the White House put forth a document celebrating "Historic Economic Growth" during the administration and pointing to the policy accomplishments it deemed responsible for this growth. Among the achievements on Clinton's list were "Modernizing for the New Economy through Technology and Consensus Deregulation." That's right, a Clinton White House document credited part of the administration's success to that now dreaded d-word, deregulation.
"In 1993," the document explained, "the laws that governed America's financial service sector were antiquated and anti-competitive. The Clinton-Gore Administration fought to modernize those laws to increase competition in traditional banking, insurance, and securities industries to give consumers and small businesses more choices and lower costs."
Everything in those passages is true...... So to the extent that Obama has said he would reverse financial deregulation, what he would largely be overturning are the financial modernizations Bill Clinton signed into law and that Clinton administration officials agree led to the ‘90s prosperity.
This is interesting, in that "1990s GOP-led deregulation" was constantly blamed for the credit mess during the campaign.
But any 2008 campaign reporter could have looked at a well-known source to prove that Obama's one-sided one-party claims were bogus, namely the New York Times of October 23, 1999. There, in an article entitled "A New Financial Era," reporter Stephen Labaton quoted Mr. Clinton and Treasury Secretary Lawrence Summers gushing as follows:
''When this potentially historic agreement is finalized,'' Mr. 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.''
This is just another in a virtually endless string of examples showing how traditional media ran with every lie and half-truth Team Obama putting even the slighest bit of energy into investigating them.
By the way, the reason the conditions that led to the bailout calls came about had nothing to do with deregulation in the private sector. Instead, they had to do with having no meaningful regulation or oversight at "government-sponsored enterprises" now turned "government-controlled enterprises" Fannie Mae and Freddie Mac.
Those two entities abused their intended charters by piling up untold billions of dollars of loans they kept on their own books instead of securitizing. They also irresponsibly relaxed lending standards to the point that they ultimately ruined the mortgage marketplace. Fitful GOP attempts at establishing meaningful regulation and oversight at Fan and Fred were rebuffed by their mostly Democratic protectors, who, including Obama, just so happened to be flush with campaign cash from the two entities.
Whether the bailout mania is or isn't justified (I think not), it's clear that what happened at Fan and Fred was both a cause and a precursor to the worse situations that arrived at Henry Paulson's doorstep.
Cross-posted at BizzyBlog.com.
