Krugman: Reagan And His Advisers Were Prime Villains Behind The Financial Mess We're In

New York Times:

"This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot." So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.

Read the whole story: New York Times

Comments

[richdibo]

It's Reagan's astrologers' fault.

[PhilipTaylor]

Time-line: Bush-WallSt CRISIS 5 INTENSE YEARS

2002=Video: Younger Bush Pushing "EASY Loans" on Minorities
2002=Bush Video: http://www.youtube.com/watch?v=kNqQx7sjoS8&feature=related
2002=Bush Enlisted Investment Banks issue "EASY SURE FAIL" Mortgages
2002=Bush Proclaims Enlisted Fannie/Freddie to buy Garbage Mortgages
2002 FED+Bush Admin=high priority on "financial innovation"+Bush"s "ownership society"
2002 FED=Used housing boom to prop up economy after 2000 market collapse
2002 FED governor=warned: lenders breeding fast-growing risky mortgages
2002 FED examiners=investigate mortgage lenders of WSBanks
2003+2004=FED analyst: deteriorating lending standards+higher defaults+ foreclosures
2003+2004=FED encourage development of alternative mortgages=sub-prime loans+ adjustable
2004=Comptroller Curr (OCC) used 1863 law=prevent enforcement state predatory lending laws
2004=OCC=prevent enforcing consumer protection laws against Big Banks
2004=Link: http://www.nakedcapitalism.com/2008/02/spitzer-bush-administration-blocked.html
2007=FED+FDIC+OCC=issue guide=No new loans to poor after 'teaser' rates expire 2-3 years
2007=FED+FDIC+OCC=Block Half of Subprime borrowers from refinancing=Insure Casino Bets
2007=FED decisions=too late to tame industry"s excesses=Help Banks win Casino Bets
2007-2009=20-30% Subprime didn't meet Refi thresholds,But 70-80% would without new rules
2007-2009=2 million teaser-rate loans expired without refi http://www.bloomberg.com
2002-2008=Graph of Housing Bubble showing straight up line 2003-2007 (below)
2007=Bubble fed by "Easy SURE FAIL" Mortgages BURST creating CRISIS
2008=Greenspan=saying FED ill-equipped to investigate deceptive lending=False
2009=Greenspan consulting gig PIMCO+asset manager GSE mortgages+senior bondholder
Graph= http://www.mortgagecalculator.org/images/us-subprime-mortgage-market-growth.png

Research:CarolAB

[LooktotheLeft]

I find all of the negative comments about Ronnie deplorable and absolutely disrespectful. He was a good man, a great President...and even a better lay.

Regards,

Margaret Thatcher

[ErnestineBass]

LMAO!

Maggie knew the secret to cultivating Ronnie's segsual prowess.

She just kept telling him, "Oh, no, love, you didn't.", and he'd do it all over again.

Little wonder he always looked so...well...dessicated...heh

[LooktotheLeft]

N/S....Ronnie and Maggie may now walk hand in hand, without inhibitions, throughout the streets of purgatory

[countfloyd]

WW II ushered in the longest era of American prosperity known to the history of humankind. Almost all of Europe's and Japan's industrial capacity was destroyed. When they got back on their feet and started making cheaper and better products it was the beginning of the end for our dominance. The auto industry still hasn't responded.

As for Krugman;

http://en.wikipedia.org/wiki/Garn_-_St_Germain_Depository_Institutions_Act

[ibsteve2u]

And how did World War II do that, you might ask?

Because prior to World War II, our inequality curve looked precisely like it does today; the wealthy elite had succeeded in sucking and sequestering all of the money out of the hands of the middle class and poor, and consumption stopped.

In the subsequent years, tax policy forced the wealthy to pay taxes, which the government subsequently re-injected back into our economy. That spending in turn supported a boom in consumer spending, and an ever increasing number of new jobs producing those consumer goods.

The wealthy, however, apparently got tired of "the rabble" becoming affluent enough to clutter up their vacation spots. So they took advantage of the birth of OPEC and the damage the subsequent oil shock did to America's economy to paint a rosy lie for America - that the economy was in the tank not because of the fact that energy is the keystone to production, but because of government spending.

Thus began voodoo economics, and the diversion of money into stagnation in the pockets and purses of the wealthy elite. Then the latter thought of "free trade", and the cheap - extremely cheap - labor offshore...and no expensive labor, safety, and environmental laws, to boot!

And with that two-edged sword, the Republicans hacked and cut at America's middle class and working poor, winning the class war and returning America's inequality curve to the same level it was at in 1929.

[ibsteve2u]

P.S. Those tax savings that were supposed to "trickle down" through the American economy?

The corporations and the wealthy elite invested it where they could get the highest returns - of course - by directly building factories offshore or by investing in the "emerging markets", where it ultimately again funded the construction of new factories.

Factories which promptly took more American jobs, undercutting the American worker and consequently discretionary consumer; the Amercan worker, after all, is also the American consumer.

At best you can call voodoo economics and "free" trade extremely myopic policies.

Or, you could call them a direct attack on America's middle class and working poor; a successful battle in the strategy of the class war the Republicans began in the late 1970s.

Unfortunately for America, the Republicans are very good at sneak attacks.

[PhilipTaylor]

Extremely well stated! 100% Right!

Now it is time to rebuild the Middle Class and Main Street the most downed group since 1929. Obama must fund the Building of a Energy, High Tech, Education Boom for the middle-class and the poor that gives new focus for Americans on REAL WEALTH Building products and services. We must bring Main Street up from the doldrums and Obama must make that his FOCUS!

[jazzman]

The policies enacted by FDR ushered in the longest era of prosperity known to the history of humankind. It made capitalism work for all of society not just the robber barons. It put socialist elements in to help make the free market system hum. It made us the greatest economic engine ever. However, soon people forgot that it was government policy that had brought them such prosperity. In the Reagan era people had come to take the New Deal for granted. Reagan used the the politics of resentment ("Look at those welfare queens driving Cadillac"), convinced citizens that government was the problem and that the poor were getting too much. Citizens wanting to stick it to other citizens began to vote against their own self interest. They happily cut off their own noses to spite their own faces. They destroyed their own social safety net. They de-regulated.

As a result we've seen our social systems, infrastructure, and communities decay and rot, the wages of people fall, our jobs shipped overseas, out environment be destroyed, and the few benefit at the expense of society at large. On top of that we have the ideologues who call anything that helps citizens either Marxism or Socialism because they don't realize that the best government blends elements of many systems and makes a society that is a good place for all to work and live.

[Andrea Castillo]

Unemployment rate both during and years after FDR: up or down?

You did your math wrong.

[nowThenzen]

Unemployment SPIKED HIGH under Repub Hoover and flucuated Down-up-Down under FDR. If you go away the problem is solves is you.

[RedKnuckles]

It's not a matter of checking the math, it's a matter of checking the facts.

1932- Hoover-unemployment rate is 23.6%
1933-FDR takes office in March, uemployment at 24.9%
1934-21.7%
1935-20.1%
1936-16.9%
1937-14.3%
1938-FDR iniitiates no New Deal programs, attempts to reduce deficit and reduce spending to compromise with conservatives, and a one year recession with the depression occurs - unemployment at 19%
1939-17.2%
1940-14.6%
1941-9.9% - and remember, we didn't enter the war until Dec of 41.
1942-4.7%
1943-1.9%
1944-1.2%
1945-1.9% - Roosevelt dies in April

Also, keep in mind that these unemployment figures do NOT count the WPA and government workers (ala Michael Steele) as employed. If they did, you can reduce these numbers by roughly 4-5% each year.

[ReasonIsMyReligion]

George Washington was the Father of the Nation.

Ronald Reagan was the Father of the National Debt.

Plain and simple.

[racom]

How can you blame reagan, he slept through it all. Just like you can't blame the last 8 years of disaster on bush, he was on vacation.

[derekc06]

Krugman tells it like it is. again.

[jmpurser]

Amazing how that really pisses people off both on the right and the left. Depressing actually.

[Schvenzlerman]

Krugman is nuts. The culprit is our Soviet-style central financial system. He thinks that having interest rates artificially manipulated by the VERY WISE MEN of the Federal Reserve, a private banking cartel that was given monopoly over our money supply in 1913, is just great. Sure, let them flood the economy with ultra-cheap money for years on end and look what happens.

[SharpDressedMan]

One day you will figure out libertarianism doesn't work in the real world.

[jayburd]

Libertarians will never figure that out. Their brains are too addled by thc...

[kepary]

yet there is no mention of the failed Social Security system from roosevelt and the "great Society" projects from Johnson... who created welfare

[MNinWI]

go away

[kepary]

im sure you would like that.. you probably only read new york times / pravda

[Andrea Castillo]

Won't make the problem go away..!

[waverly]

If Ronald Reagan didn't start the practice of robbing Social Security it would be solvent. He initiated the whole process of stealing from the poor to provide for the wealthy.

[Andrea Castillo]

What in the world are you talking about? Social Security is a glorified Ponzi scheme that will never be able to support itself. Social Security is inherently insolvent.

[kepary]

that was first robbed from by johnson who counted it as money into the ederal govt to pay for his failed social programs

[derekc06]

our welfare programs are not what put us in this crisis.

[Andrea Castillo]

So money-leeching, deficit-tripling, inefficient, cannibalistic government programs had nothing to do with it?

[doublehelix68]

Because Regan borrowed against the Social Security System (because the money was just sitting there). That, plus, the anti government rhetoric was the beginning of the end.

[SharpDressedMan]

How did the Social Security system fail?

[derekc06]

exactly. it has not failed (yet, not to say that it doesn't need some help) so to blame our current crisis on social security is ridiculous. they're just trying to shift the focus to something they can blame the poor for.

[Dbos]

Regan did play the gipper but he was one of the four horse man,OF THE APOCALYPSE.

[motoGpifupleez]

Two outstanding books to read if you are tired of the mythology the RightWingers are trying to create around the second worst President in U.S. history:
1) 'Tear Down This Myth' by William Bunch.
2) 'The Man Who Sold the World' by William Kleinknecht.
And yes, unlike the rabid sycophants on the Right, I acknowledge the contributions of Presidents Carter and Clinton to this current predicament, but make no mistake, President Reagan did more than the two of them combined in destroying the middle class.
LeftWingers need to get over the fact that Mr. Krugman doesn't fawn all over President Obama and his policies just because he isn't President George W. Bush. The situation, the plight of the citizens, and the policies that will benefit those citizens are more important than the worship of your "leader".
Don't fall into the same trap the RightWingers did with regards to the fairy tales being spun in defense of their hero, President Reagan.
Thankfully, we have mountains of information to counter the propaganda of the Reagan sycophants.
Keep up the good work, Nobel Prize Winner Paul Krugman.

[graceland9]

I was just about to post the Kleinknecht book. It's a good read - and explains a LOT.

[AZM]

In 1980 the national debt was about one trillion dollars. This debt was accumulated over 200 years. After eight years of Reagan, the debt reached three trillion dollars, i.e., during eight years of reaganomics this country accumulated twice as much debt as we had accumulated in the first two centuries of our existence as a nation!

[Andrea Castillo]

Stagflation is now a distant memory, I suppose.

[chedet]

That's all you have to say for yourself? I'm surprised.

[denny8844]

And now under Obama we will do the same have the debt under him be more than the sum total of all the 200 years of our existence Apparently this escapes some people

[zendem1]

President Alzenheimer bankrupted the country. It's a hard fact, and Cons try to revise it, but the truth is the truth.

[denny8844]

Our economy growth and the jobs created under Reagan was greater than any time before or after splain that Facts are a hard thing to refute

[SharpDressedMan]

There you go again, blind to truth and reality. Look at the Clinton years of prosperity and if I were you I wouldn't bet any money on Ronnie.

If you were alive, an adult and aware in the 80s, you would remember how good old Ronnie demolished the smoke stack industry and sent millions of jobs overseas.

[Andrea Castillo]

True, Reagan was unable to balance the budget while at the same time fighting stagflation, the spread of Communism, and the aggressions of the Soviet Union. However, he did put money back into the hands of American people with his tax cuts and cut the unemployment rate dramatically.

As we all know, the economy does not work instantaneously like a light switch. That Clinton surplus? Courtesy of Ronald Reagan.

[denny8844]

Thank you so much Finally someone with a little bit of historical perspective and economic literacy Very refreshing

[jmpurser]

He put money back in the hands of the rich and told us it would "trickle down" to the poor. He never passed a tax cut, just tax deferments. He put America on the path of stealing today's economy from our children.

[pompous]

History is both unfair and yet inescapable. Reagan was a follower of the supply side school of economics. Essentially the economic policies were created for the benefit of producers, i.e. coporations via tax cuts and other monetary incentives to increase capital spending on production and services thereby giving the consumer more choices. Theoretically captivating supply side has failed by virtue of its onsided emphasis on the corporation. Labor being the largest cost business looked to curb wages by crushing unions and offshoring without the acceptance that labor is also a consumer. Who would consume all that supply and how? Perhaps the gipper explains this conundrum better than me www.youtube.com/watch?v=uJDhS4oUm0M

[Carolab]

That Clinton surplus? Courtesy of baby boomers paying double FICA, under CLINTON, baby.

Ever read "Greenspan's fraud"? Our SS was stolen under Reagan, per Greenspan's advice, so as not to add to the "deficit", after Reagan's tax cuts made our domestic programs unsustainable.

[richdibo]

To deal with high post-Carter inflation, the feds implemented a monetary policy of tight credit. This reduces inflation at the cost of unemployment. Monetary policy is not socially neutral. It adversely affected poorer workers who had to pay taxes on their unemployment benefits. During Reagan's 1st term, there was the highest number of unemployed since the great depression. Monetary policy under Reagan created substantial unemployment. Any subsequent abatement should not be considered a great economic accomplishment.

"That Clinton surplus? Courtesy of Ronald Reagan."

Clinton's fiscal responsibility was one reason - not spending more than revenues taken in.

[mesmerised]

A Marxist condemns a capitalist.

Phffft!

Plus, the Marxist is wrong. You can twist anything and convince people who don't know any better - left wing bloggers and responders, you know who are! - and make it sound reasonable.

[Andrea Castillo]

"How do you tell a communist? Well, it's someone who reads Marx and Lenin. And how do you tell an anti-Communist? It's someone who understands Marx and Lenin."

[Paul Peete - Huffpost Blogger]

Your hero is finally exposed as the plunderer he was. I guess those rock sculptors at Mt. Rushmore are going to have to file for unemployment too. As for Krugman being a Marxist, in the end, we are where we are thanks to the Pubbies.

[Liberal2]

And it disgusts me that an airport and a US Navy aircraft carrier was named for this Ess oh Bee.

[ApolloSpeaks]

Barack Obama is the King of Plunder.

[ApolloSpeaks]

Then again as Gorbachev said: "Ronald Reagan spent the Soviet Union into bankruptcy." The dividend of Reaganomics was an end to the terrifying Cold War. A job well done.

[mesmerised]

The Left has finally created the pieces they needed to besmirch the works of Reagan. PEOPLE failed after him, not his principles. Just like people are failing the Left as we are all posting.

[JGatsby]

Do you care if what you say is obviously wrong? You are free to hate Krugman but to call him a Marxist is just absurd. Its sad what so much of the right has come to. I remember when I could have intelligent discussions with conservatives. Now for so many it seems that arguments come down to name calling and "Phfft".

[Andrea Castillo]

Take a look around these forums and you'll see its not limited to the right.

[mesmerised]

You're right. Krugman is a KRUGMAN. But he ripped off Karl Marx.

If you can't decipher KRUGMAN'S rants and see his belief in centralized government, collectivism, and redistribution, then you are not too bright.

[Jeff1958]

3 paragraphs and you say absolutely nothing to suggest you have a clue.

That's the best you've got?

Pfffffftttttt!

[mesmerised]

Pfffffft! is about all you can understand. Sorry, go back to your college professors and belt them in the mouth for f-ing you up. Then demand your money back. Good luck.

[SharpDressedMan]

Someone who doesn't agree with the Reagan/Bush/Bush circus of economics isn't a Marxist. Get real.

[thepianodiva]

Thank you for saying that, Mr. Krugman. I remember the Reagan years. Many of us knew that whole supply side stuff was cr@p from the get-go. Now everyone can see where it all ends up.

[Liberal2]

Sorry, but hardly anyone does. And this is how the party of Greed Obstructionist Perverts will rise again.

All they need to do is whisper, "It wasn't the concept of supply side and trickle down that was wrong, it was them democrats who didn't let it work." And the bottom half of American voters will believe.

[Andrea Castillo]

Given the results of our recent presidential election, you'll see that simply isn't true.

[classicalgeek]

Even (not yet) President George H. W. Bush called Reagan's policies "voodoo economics" in the primary races, and said, "It's all done with smoke and mirrors." Unfortunately too few people listened.

[derekc06]

Himself included.