It's Time for the "Deregulators" Like McCain to Step Aside and Shut Up
Rep. John Boehner, R-Ohio, the House Minority Leader, made this statement on Sunday's edition of This Week regarding the need for a bailout plan to deal with the subprime mortgage fiasco: "We need to rise above partisan politics ... and deal with this as adults."
My response? That's a load of crap. (Yes, I'm being graphic on purpose. I'm mad.)
Of course, yes, the two parties need to come together and come up with the best long-term solution to what many are calling the biggest financial crisis since the Great Depression. So in that sense, Boehner is correct.
But that's not what Boehner really meant. In the context of the discussion, he made the statement to defend the position that Congress should pass the "clean bill" proposed by the Bush administration, which would provide for buying up "illiquid" (financial speak for "junk") mortgages with no limits or regulations for the institutions taking advantage of the benefit.
And that is why Boehner's comment was crap.
The current crisis, which is requiring a proposed $1 trillion bailout by the government, is the coming to fruition of more than a decade of a policy of deregulation of the financial markets. It was an experiment in letting the free market, completely unfettered, regulate itself. And the experiment has failed. Miserably. So much so that the tax payers will now have to front more money than we have spent so far in Iraq, and twice what we spend on health care each year (according to George Stephanopoulos on This Week), to keep the reckless behavior of the unregulated institutions from affecting the everyday finances of Americans.
Deregulation has been the mantra of George W. Bush and of John McCain (who said recently, "I'm always for less regulation ... I'm fundamentally a deregulator"), and of former Senator Phil Gramm, who is the architect of McCain's economic policies, and of, yes, John Boehner, who in this very appearance on This Week again boasted of being a deregulator.
So, yeah, I'm angry when a guy like Boehner, who got us into this mess in the first place, has the unmitigated nerve to try and dictate the terms of how to fix things. Who is he to tell anyone how this should be handled? The deregulation-happy politicians need to shut up and stop urging us to continue the same policies that allowed the crisis to occur in the first place.
I am not an economist, and nobody would read a 10,000-word description of the mechanics of the subprime mortgage debacle if I was, but at its core, what happened is actually pretty simple. Lending money for the purchase of a home used to be fairly straight forward: An applicant would undergo close scrutiny from a bank to determine if he/she would be able to pay back the loan. Banks knew a small percentage of these borrowers would default, necessitating foreclosures and the bank reselling the properties, but the plan was for a vast majority of buyers to pay their bills.
But then came deregulation, which took down the barriers that prevented lenders and borrowers from acting irresponsibly. After the Glass-Steagall Act (which was put in place after the 1929 stock market crash to separate investment banks, which engage in risky behavior, from commercial banks, which operate with average consumers) was gutted and derivative securities were taken out of the realm of regulation, everything changed. (As an aside, in 2003, billionaire Warren Buffet warned that derivatives were a potential "mega catastrophe" for investors.)
In this new world, companies issuing loans were no longer doing so with the idea of the borrower repaying them. Rather, the institutions were earning fees just to issue the loans, with the knowledge that they would immediately be bundled and securitized. As a result, the institutions issuing mortgages were encouraged to write more and more loans so that they could be sold off, and the granters of the mortgages were no longer at risk, simply collecting their fees and passing the loans along.
The result was lots of loans that people couldn't afford. Some of it was irresponsible borrowing, some of it was predatory lending, but all of it was made possible by deregulation.
And where has it left us? With a tough decision to make. Do the American taxpayers, most of whom did not engage in irresponsible behavior, pony up the money to bail out the institutions and borrowers that acted recklessly? Or do we leave those that abused the system to handle their own losses, with the effect being that the American taxpayers are left in a severely damaged economy?
The frying pan or the fire, essentially.
Which is why Boehner's fake pleas for nonpartisanship and demand for a "clean bill" are so outrageous. What he and other Republicans are saying is, "Give us the money to bail out the people who abused the system, but we don't want to put any limits on the abusers, since, after all, the free market works."
Does Boehner not understand that executives at these companies have walked away with unprecedented millions in compensation, all while the government now has to spend hundreds of billions of taxpayer dollars to bail these same companies out? You can argue all day and all night that the bailout is necessary to save the economy, and that is probably true, but it doesn't change the fact that the offenders got rich off their schemes, while the government is paying to clean up their messes.
Thankfully, for once, it seems like the Democrats, who have done nothing in the last 20 years to stop the Republican drive to deregulate, are finally finding their footing. (I know you thought I was going to reference another part of their anatomies, and I almost did.) On This Week, Democratic Senator Chris Dodd of Connecticut agreed that something needed to be done fast, but he also noted that Congress had to act "quickly but deliberately." Dodd said that any legislation had to account for "reciprocity," "oversight and accountability," and "governance" and "debt issues."
In other words, Dodd doesn't want to bail out the reckless companies without getting something back for the taxpayers. And that idea is present in the Democratic proposal made today that would require companies selling their junk mortgages to the government to give the taxpayers a stake in those companies, to limit the compensation of the executives running those companies, and to increase oversight of the companies while they work out of their troubles using taxpayer money.
I wrote earlier this month that McCain's claims of being an agent of change, when he was at the heart of everything that needed changing, was the ultimate example of the Yiddish word chutzpah (nerve). McCain's statements about the financial crisis show an equal amount of chutzpah. McCain, who still calls himself a deregulator, says that we need sweeping regulations to make sure a meltdown like this one never happens again.
It's like Wile E. Coyote, with feathers coming out of his mouth, asking to be appointed the guardian over the Roadrunner.
McCain, who has spent more than 25 years in Congress and has as his main economic advisor Gramm, the man most responsible for the gutting of Glass-Steagall and the deregulation of derivatives, decided on the campaign trail yesterday that the person responsible for the subprime mortgage crisis was Barack Obama. McCain said something about Obama being in bed with special interests, which is interesting when you consider that McCain's campaign is dominated by lobbyists, including Rick Davis, his campaign manager, who has accepted $2 million in fees from Fannie Mae and Freddie Mac (both of which were bailed out by the government earlier this month) with marching orders to, you guessed it, defend them from stricter governmental regulations. Yes, this is the same McCain who, as a member of the Keating Five, was at the center of the savings and loan debacle of the late 1980s and early 1990s, which also required a government bailout (at a cost Stephonopoulos put at $120 billion).
If this whole thing wasn't so serious, it would be a laugh riot.
Let me be clear: I don't absolve the behavior of the Democrats over the last two decades. The party did not do anything to prevent the Republicans from deregulating the financial industry and creating a lawless environment, which led to the abuses that caused the current crisis. And I'm not arguing that Obama's policies are some kind of all-encompassing cure-all for the debacle.
What I am saying, though, is that there needs to be attention focused on the fact that this mess was created by a mass of deregulators, who now have the chutzpah to try and tell the American people how to fix the debacle they have caused. And I am saying that for McCain, who sells himself as a proud deregulator, to try and portray himself as the man who is going to come in and rein in the companies he has made a career out of setting free is absurd. And such a course of action would be a horrible idea for the American people.
"We need to rise above partisan politics ... and deal with this as adults." I agree. So, as adults, let's agree that complete deregulation was a failure, and let's require the companies being bailed out by the taxpayers to have to accept some consequences for their actions. And let's put a system in place that regulates the worst impulses of the financial industry to ensure that greed does not push Wall Street to the brink of a meltdown again (and do so without being overly intrusive in a way that hurts legitimate business).
It's time for us to move forward in a smart fashion, and it's time for Boehner, McCain and the other self-proclaimed deregulators to accept their responsibility in this debacle and stop preaching more of the same. That's the kind of nonpartisan politics I can get behind.
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the issues are:
palin is being investigated for abuse of power .
she and her husband have violated court ordered subpoena's
mccain is obstructing justice, by interfering in the investigation.
isn't this illegal? i am 100% certain if barak obama's vp had done the same, he would not be the nominee, would he?
they are not allowing reporters to ask unscripted questions.
they are denying reporters access to her foreign policy improv's.
is the mccain palin ticket above the law?
have they rewritten the rules as we watch?
are they setting in motion the new standard for the press in the mccain /palin regime?
how far will they go?
what is next ?
I got to listen to the hearings today on the bailout. Senators and Executive branch honchos were both giving full-throated explanations, and Congress was expressing the need for remedies. But in all of the yammering, I did not hear anyone say that at a minimum, we need to repeal the repealing of the Glass-Steagall Act immediately. If that legislation kept us from this very scenario for 70 years, seems it would make sense to get back under that umbrella. And, anyone standing in opposition to that should be marched out to the courtyard behind the Capitol, given a last cigarette, last rites, and a blindfold, and sent packing.
America / Americans: these folks have truly gone power mad, and the implications of this bailout which will effectively result in China, Japan, et al owning America--on paper. They're the ones rolling in dough (see Walmart and your local Honda dealer), and as any good detective will tell you: follow the money, and you'll see what the game is.
I wonder if the stock plummet could not be corrected on its' own.
I think banks saw an opportune time (and the GOP) to use this current crisis as an excuse for a baliout that they could blackmail Dems with during an election year.
I'm glad the public and the Dems are not falling for it though.
The GOP was expecting after 8 yrs. that the DEms would be stupid enough to fall for thier cronyisitc funding of mismanagement..and are trying to get it done before they go out of office..
Dems need to slow it down-take thier time-make banks/Wallstreet it a little....and comb through details of how we got here first and correct that legislation that allowed it to be put in place before handing out any mony..
I also think that the money should be apportioned in increments over one-lump sum-and exhibit good faith of compliance with changes to the law.
They (the Administration and the Republicans) really do believe it is THEIR money, to do with whatever they want. Congressional Democrats and the American people are just minor impediments in their slog to enrich themselves and destroy the goverment. When I read in a blog yesterday, that 401k's were not really created as retirement instruments for the typical middle class worker; they were just another "Slush Fund" for the bankers to use. Kind of like how the Social Security Trust Fund is used by the Administration. "Of course!" A light bulb went off in my brain.
I really think there should be 'consequences' (like jail time) for the perpetrators of this fiasco. They may want to call it 'malfeasance' or 'market risk', but I think it could and perhaps, should, be called *stealing* from the public.
We NEED a "New Deal" in this country!
That's craven Republican hypocrisy for you. Flog the Democrats, day in, day out, attack, attack, attack. Many's the time they've put the opportunity for cheap political points for their party ahead of the health of the country as a whole. But when the inevitable failure of their policies can no longer be denied, they're always the first to wail and cry "Bipartisanship!"
I say let the chips fall where they may and should the masses take to the streets in anger then justice will be delivered, albeit delayed.
Since the republic party and conservatives hate socialism for the masses they have no right to expect the masses to rally around a socialist program to bail out the wealthy.
Any trolls got a problem with making the wealthy and greedy take a fall or are you now in favor of socialism for America?
I hope you are ready because this is the door that also opens for socialized medicine! The people will demand something for bailing out the greedy white nobility of the Aristocracy and rightfully so!
Hear Hear!
This is not the first time MCCain and cons have done this to us. Remember savings and loan bailout that thousands of elderly lost their retirement funds. 30 years of no regulation ,,,no accountability ,even encouraged to happen..Cons getting richer taking middle class money.
The arrogance of the conservatives at this point is staggering.
Thank you Mr. Bard. I will be back .
It is time for these miscreants to commit hari kiri. Fat chance that any of them posesses the sense of shame required.
It was not deregulation. The Community reinvestment act of 1977, made worse in the mid-90's when the act was strengthened and FORCED banks to give loans to people WITHOUT the normal scrunity that they would give to most borrowers. The govt forced these banks to give loans to people that probably would not be able to pay it back. In a normal world, the banks never would have had to make these loans if it was not for govt oversight saying they had to.
Fannie and Freddie prime targets no 1 and no 2 in this whole mess. Why is there no investigation from congress? Because the investigation would lead to Dodd and Barney Frank. Dodd and Frank had a chance in 2005 to take care of this and chose not to. Pelosi would never investigate her own. Scum is scum doesn't matter a (D) or an (R).
Here it is again, the "1977 CRA is the real cause of all of this" line of garbage. Where is this coming from, did Rove issue a memo to the troops?
Anyone who claims that the CRA is the root cause of the current financial meltdown is either
a) too ignorant of the facts to be credible on any level regarding the issue or--more likey--
b) lying in a cynical attempt to play "fetch the stick, boy!" with the current crisis.
It was deregulation. If you want to argue, save time and just use "a)" or "b)" as your response.
You are saying the Gramm amendment repealing all regulations between mortgage houses and investment firms had no bearing on this out come?
Where did you get your Econ degree from....Heritage University? If I am not mistaken that's the same place Monica Goodling got her law degree which happens to be considered a 4th tier school...which means its dead last in credibility!
Canada managed to get unprecedented numbers of first-time buyers into housing, keep foreclosures low, and only suffers losses in value in the single figures. Many areas have not gone down at all, despite our economy being savaged by yours and the auto-manufacturing industry falling off due to reduced American demand for pickup trucks used primarily by tradesmen and construction workers. But we have strictly-regulated banking.
how manyy (%) of the defaulted mortgages were in these 'community reinvestment' mandated loans and what is the % of the total value in default? I think that is important. I have watched dozens of TV programs over the last few years about the impending disaster, profiling dozens of neighbourhoods and literally hundreds if not thousands of individual homes in foreclosure and none of them appeared to be in inner city neighbourhoods. The really shocking losses are in high-value suburban and subdivision neighbourhoods where values for middle and upper-middle class homes had been pumped close to seven figures and then abandoned by the mortgagaee when the value plummeted and resale became impossible without reducing asking prices dramatically. And the homeowner needed that money because they lived off of it to keep the driveway filled with jet-skis and assorted necessities of entitled living.
Its the fact that fannie hyped their profit by 11 billion dollars, those securities that the investment banks bought from them are now as good as toilet paper. They looked good on paper after the strengthening of the CRA in 1995. Its a GSE, therefore can never fail, says barney frank
Horseshit! I had to go through the wringer when I applied for my mortgage in 1997, and the amount I was approved for was strictly limited and solely based on my debt-to-income ratio.
WARREN BUFFET WARNED YOU AND ALAN GREENSPAN WARNED YOU !!!!!!!
http://news.bbc.co.uk/2/hi/business/2817995.stm
I'm right there with you, Mr. Bard, and I can top that statement of Boehner's with another he made - apparently on that same show - as quoted in today's New York Times:
"Representative John A. Boehner of Ohio, the House Republican leader, said on ABC: "We don"t need 535 members of Congress adding their best idea. We need to keep it clean, simple, move it through the House and Senate, and get it on the president"s desk.""
So asserts the contemptible Little Napoleon John Boehner from Ohio.
OUTRAGE is indeed the word, when the collective WISDOM of OUR Representatives is dismissed out of hand as unnecessary - indeed a dangerous hindrance - by one of the self-enamored powers-that-be (who represents a single district in Ohio) in our failed Congress. Talk about a complete repudiation of the whole purpose of the existence of our federal legislature, and values that are the complete antithesis of democracy and self-governance...
When the "rank and file" in Congress - otherwise known as the representatives of the people - witlessly CEDE their part in the debate to a handful of unelected "party leaders," they do ENORMOUS damage to our nation. We need EVERY good idea we can get, and there are ONLY 535 people who have the ability to put those ideas into action on our behalf. Every legislator ought to DEMAND an equal say in what's being devised for our national future right now - party power and artificially-imposed Congressional hierarchies be damned.
Hurry, hurry, the $700 bn check needs to clear by 1-20-09!
Does anyone believe that McCain, one of the arsonists, is going to put out the fires he helped set?
Actually, Rockymountain, Chuck Hagel introduced the bill and McCain did call for its passage.
Dole supported this legislation also.
It failed in the Senate and has been re-introduced by Hagel again and neither McCain's name or endorsement is no where to be found. Dole is still a co-sponsor.
McCain has always been a fan of de-regulation and only becomes pro-active when the sky is falling.
See Mitchell Bard's Profile
Thanks for the comments, Anicebarbie. It's great when commenters add facts to the discussion.
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