By Stephen C. Rose
There are two key pieces of evidence in the maelstrom we are now calling a meltdown -- but which began with a mortgage crisis. They suggest that any effort by partisans of Barack Obama to skewer the Republicans for screwing up the regulatory environment is doomed to be met with a substantial number of Pinocchios.
In the case of the mortgage crisis, the blame cannot be laid to either party. Democrats and Republicans fed at the same trough and did so for decades. The main role of the Obama candidacy is to offer a way out. But that way does not involve throwing the kitchen sink at the Republicans. It is time for a little ray of common-culpability truth.
Bill Clinton Was Complicit in Repealing Glass-Steagall
Bill Clinton and the Wall of Me
Billionaire Sanford I. Weill, who according to Louis Uchitelle made "Citigroup into the most powerful financial institution since the House of Morgan a century ago," has what I call the Wall of Me leading to his office, which he has decorated with tributes to him, including a dozen framed magazine covers. A major trophy is the pen Bill Clinton used to sign the repeal of the Glass-Steagall Act, a move which allowed Weill to create Citigroup. Fittingly, Citigroup is a major contributor to guess which current Democratic Presidential candidate?
A Frontline report on the repeal of Glass-Steagall shows how those with money end up with pens from the President of the United States on their walls.
Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.
Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government?"
When Bill Clinton gave that pen to Sanford Weill, it symbolized the ending of the twentieth century Democratic Party that had created the New Deal. Although the 1999 law did not repeal all of the banking Act of 1933, retaining the FDIC, it did once again allow banks to enter the securities business, becoming what some term "whole banks."
The repeal of one of the most important pieces of legislation in this nation's history came about as a result of another Clinton "triangulation," the wobbling attempt to find the middle of the road that has somehow managed to pass for a philosophy with many Democrats for over two decades. As former Clinton former campaign Richard Morris once described it, you move a little to the left, a little to the right. I'd love to hear Clinton give that explanation to a foreclosed home owner today.
With the stroke of a pen, Bill Clinton ended an era that stretched back to William Jennings Bryan and Woodrow Wilson and reached fruition with FDR and Harry Truman. As he signed his name, in the whorls and dots of his pen strokes William Jefferson Clinton was also symbolically signing the death warrant of Liberal America and its core belief in the level playing field that had guided the Democratic Party. But it was the gift of the pen to Sanford Weill and its assuming an honored place on the Wall of Me that rubbed salt in the wound.
As I listened to Barack Obama truthfully skewering McCain for having lobbyists all around, with Rick Davis possibly on the take as late as last month, I began to wonder if John McCain was lying when he said he had warned about the mortgage implosion two years ago. Turns out he was not:
McCain Skewers Fannie and Freddie in 2005
FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005
Mr. McCAIN. Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were ``illusions deliberately and systematically created'' by the company's senior management, which resulted in a $10.6 billion accounting scandal.
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
The vehemence of those who favor a third party route is justified by the misbehavior of both parties.
Barack should suggest the past is a minefield of errors and focus laser-like on a way out. The Obama Campaign (and the commentariat) should walk very softly when trying to hang the crisis exclusively on the Republicans.