Looking At The Ads… Okay, Just One.

Don’t get me wrong.

I like some of what Bill Clinton did as President. But then again, I like some of Reagan too. However, there’s a slight issue I have with Mr. Clinton’s latest Obama ad.

In the ad, you can watch here courtesy of YouTube, the former President talks about how Romney’s plan is to go back to deregulation. Here’s a quote:

This election, to me, is about which candidate is more likely to return us to full employment. This is a clear choice. The Republican plan is to cut more taxes on upper-income people and go back to deregulation. That’s what got us in trouble in the first place.

Okay, Mr. former President Clinton. Let’s look at the deregulation that “got us in trouble in the first place.”

First of all, be it known that in my world neither the Democrats or Republicans are blameless. Both screwed the situation up badly and left us in the mess we find ourselves in right now.

Quick history:

  • 1920s: In a nutshell, people were going to the bank to take out a loan to go gamble in Las Vegas. In a stock market craze, American’s bought stocks on “margin.” Loans were given based on the idea that the stock would rise beyond the loan value and everyone would make money. Along came 1929.
  • As a part of FDR’s First Hundred Days, the Banking Act of 1932 and 1933 were passed. These “reform” acts were designed to prevent a future Depression from ever happening again. Beside creating a FDIC, the Banking Acts (later known as the Glass-Steagall Act after the two Congressmen who authored the bills), separated commercial banking from investment banking.
  • 1977. The Carter Admin authors the Community Reinvestment Act (CRA). The CRA, vaguely written and hardly enforced, authorized banking regulators to ensure that insured banks were serving the “whole” community.

1993. The incoming Clinton Administration, working on a 1992 Boston Federal Reserve Study on home loans, encouraged lending institutions to revisit their loan policies. At the behest of Clinton Regulators, banks had to prove that they were meeting a quota of loans made to low- and moderate-income borrowers. In other words, banks were encouraged to create innovative and flexible loan policies to get people who would otherwise be unable to get a home loan. A 1994 HUD National Homeownership Strategy, promoted by Clinton, called for

“financing strategies, fueled by the creativity and resources of the private and public sectors, to help homeowners that lack cash to buy a home or to make the payments.”

On top of this, Freddie Mac and Fannie Mae were also encouraged to open up the purse strings so that everyone could be homeowners.

Not to be out played in the “we-like-the-little-people” game, Republicans pushed through the Gramm-Leach-Bliley Act which undid all things Glass-Steagall. After nearly twenty-five years of lobbying from the banks, Wall Street and Main Street Banks were once again able to merge policies, institutions, and lending practices. The reform effort of FDR to prevent another Great Depression went by the wayside. What we had was a massive housing speculation (more commonly called “flipping”) and eventually a collapse of the value of middle-class family home prices.

This brings us back to “…deregulation. That’s what got us in trouble in the first place.”

By encouraging banks to be “creative” and flexible in their lending policies, Clinton dismantled every oversight that the banks had establish for themselves in their lending programs. If that’s not deregulation, then maybe I don’t understand the term.

Deregulation. It’s not just something the Republicans are good at.

It’s time we put on our thinking caps as we listen to these campaign ads.


3 thoughts on “Looking At The Ads… Okay, Just One.

  1. It’s funny how politicians from both parties talk about “regulation” as if it’s a dial you can turn from low to high. There is bad regulation (40-page filings that don’t get used) and good regulation (you aren’t allowed to dump toxic chemicals in rivers, or lie to people when selling them financial products). I think the debate over the financial crisis tends to miss this.

    • As a teacher I see it every day with students: They don’t want to be treated like “kids” but yearn for rules and structure. The citizenry needs rules, true. Otherwise we’d all turn out living like Thomas Hobbes theorized. I just like to think that there’s a limit to how much “rule” the government needs to impose, and how much we should just work with common sense.

      With the financial crisis, the regulations (whether imposed by corporations or by the government) were working. When the Clinton Admin loosened up the lending policies and when the Gramm-Leach Act remarried main street banks to “other” lending lines all heck broke loose. Sure, for a while people were making a big dollar flipping houses, the middle-class had disposable income and played the market (housing and stock), but eventually the bubble had to burst like it did in 1929. To say that the middle-class was better off during the 90s is a misnomer. We were living in a tech boom (dot.com’s) and a housing surge (though overly bloated). Just look at Facebook’s IPO to see how well the dot.com boom went for most and we are all feeling the after affects of the housing crisis.

      Regulation is just what it is: Government’s attempt to keep us from doing stupid things because we’ve lost our compass on right and wrong. I spill hot coffee in my lap, the government must regulate coffee temperatures at restaurants.

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