The Glass-Steagall dodge

posted at 9:10 am on October 1, 2008 by Ed Morrissey

Democrats have tried to cast blame for the credit-sector meltdown on deregulation, and point to the repeal of the Glass-Steagall Act as the linchpin.  The repeal came in 1999, though, and it did nothing to cause the real cancer at the heart of the crisis: wildly overvalued mortgage-backed securities issued by Fannie Mae and Freddie Mac.  If Democrats don’t believe that, they can ask one of their own:

A running cliché of the political left and the press corps these days is that our current financial problems all flow from Congress’s 1999 decision to repeal the Glass-Steagall Act of 1933 that separated commercial and investment banking. Barack Obama has been selling this line every day. Bill Clinton signed that “deregulation” bill into law, and he knows better.

In BusinessWeek.com, Maria Bartiromo reports that she asked the former President last week whether he regretted signing that legislation. Mr. Clinton’s reply: “No, because it wasn’t a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter.

“But I have really thought about this a lot. I don’t see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn’t signed that bill.”

In fact, the repeal made it possible to rescue depositors from the collapse of banks and protect FDIC funding, keeping taxpayers from footing the bill for the collapse.  And the repeal was no partisan project, either; it passed 90-8.  Thirty-eight Democrats in the Senate voted for the repeal, including Barack Obama’s running mate, Joe Biden, as well as Chuck Schumer, John Edwards, Chris Dodd, John Kerry, Joe Lieberman, and others.  In other words, a Democratic President signed it, and it had the support of members of every Democratic ticket since then — including Obama’s.

Obama wants to blame Republicans for transparent political purposes.  Phill Gramm wrote the bill, and Gramm has been an adviser to John McCain.  That makes this a convenient target for the Democrats, but Clinton won’t play along with it.  He insists that the repeal of Glass-Steagall was something he supported on his own, and that it had nothing to do with the financial crisis we see now.

Democrats don’t want to talk about the real problems at the heart of this crisis.  Fannie Mae and Freddie Mac created an artificial demand for loans by buying up bad paper and turning them into overvalued MBSs.  When regulators tried to report accounting irregularities, Democrats like Barney Frank, Lacy Gray, and Gregory Meeks accused them of racism.  Some Republicans, such as Chuck Hagel, McCain, John Sununu, and Elizabeth Dole, tried bolstering the regulation of Fannie and Freddie, but Democrats succeeded in blocking those attempts.

Neither Glass-Steagall nor its repeal could have stopped Fannie Mae from selling overvalued bonds and creating a Ponzi scheme in the housing industry.  That was Congress’ job, especially after OFHEO and Alan Greenspan warned them of the impending collapse.  Democrats in Congress made sure nothing got done to resolve the problems before the collapse occurred.  Glass-Steagall is nothing more than a red herring for the ignorant.


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The real cancer is the influence by community orgainizers to force lending institutions to make idiotic loans to those who could not possibly repay their mortgages. This was the problem that only magnified with time and led us to this.

volsense on October 1, 2008 at 9:13 AM

You forgot to identify Bill Clinton as ‘Right Leaning Independent’.

DaveC on October 1, 2008 at 9:13 AM

Barry: LOOK PHIL GRAMM!

McCain: LOOK FRANKLIN RAINES!

If the American people ever researched things I know which’d carry more weight.

sven10077 on October 1, 2008 at 9:17 AM

Obama wants to blame Republicans for transparent political purposes.

And it will work.

Zetterson on October 1, 2008 at 9:18 AM

They won’t acknowledge what caused the problem but we are supposed to hand them a blank check to fix it?

Buddahpundit on October 1, 2008 at 9:19 AM

Me thinks sumpin reeks,and a
grand plan of affirmitive action
forced on financial institutions!!

canopfor on October 1, 2008 at 9:20 AM

Glass-Steagall is nothing more than a red herring for the ignorant.

That’s correct, but that’s not stopping Obama from running a commercial claiming that the repeal of Glass-Steagall and the Republicans’ insistence on “de-regulation” are what caused the whole mess. I have seen this commercial running here in Arizona several times now, and nothing to refute it from the McCaim camp or the Republicans. They may have decided not to spend the money on ads here, because McCain is not in real danger of losing Arizona, but I hope they have ads running elsewhere because the MSM is certainly pushing the “de-regulation caused this mess” myth as hard as they can.

McCain and the Republicans need to fight back and get the truth out (beyond sites like this one) before it’s too late.

AZCoyote on October 1, 2008 at 9:22 AM

Water under the bridge.

Dodd and Frank are going to hold their seats and continue to steal from us, meanwhile the bailout will go forward and we get front-row seats to see the financial raping of not only ourselves but also our children and grandchildren.

Maybe I need to let loose that little part of me that wants Odummy to win, the part that wants the liberal asshats to have all the levers of power just so I have a bigger reason to hate.

Bishop on October 1, 2008 at 9:22 AM

Obama wants to blame Republicans for transparent political purposes.

And it will work.

Zetterson on October 1, 2008 at 9:18 AM

No more of this. If we continue to stand on the sidelines and just talk about the lies and biases that are about to destroy this country we will have no one to blame but ourselves.

It’s time to stand up and hold these people accountable. It’s time to approach the media and the democrats from the standpoint that they have been liars and hypocrites in the past and must prove their assertions from that benchmark.

We’ve allowed them to paint us from the base point of being obviously racist greedy lying pigs for far too long.

Turn The Tables.

Dorvillian on October 1, 2008 at 9:28 AM

This victimhood of pitting “poor” blacks aginst “rich” whites is a democratic ploy that has worked for decades. Employers could care less what color your skin is. You produce more than you are paid, you advance. Too bad that hate supplants this elementary lesson in basic economics. Without racial hatred and class envy, the democrats could not exist. They have always been the party of hate. That is who they are.

volsense on October 1, 2008 at 9:28 AM

So, I’m wondering when the Clintons are going to unleash their October surprise on Zero. And I wonder what it will be. I hope it’s really good.

ErinF on October 1, 2008 at 9:29 AM

FWIW: If you get the WSJ (hardcopy or online), read the editorial on Biden’s and Biden’s son to the tort bar in Delaware.

Funny how Dems get tons of support from the tort bar as it cripples the automakers and the Dems get tons of support from the unions as the tort bar cripples the automakers.

BuckeyeSam on October 1, 2008 at 9:31 AM

Those who gloss over history in the interest of protecting corrupt/incompetent Democrats, are condemned to repeat it.

Thanks media! First you do everything possible to help jackass Democrats get elected, then you cover up for them when they inevitably screw up in office.

Glad you’re protecting the little guy, media! And the Democrats who are stealing from the little guy with both hands.

NoDonkey on October 1, 2008 at 9:31 AM

Poor Franklin Raines….getting castigated this way. Hope his MILLIONS he raked in make him feel better.

Do you think Obama will exclude him from his tax increases?

originalpechanga on October 1, 2008 at 9:32 AM

“Without racial hatred and class envy, the democrats could not exist. They have always been the party of hate. That is who they are.”

Hate and stupidity and thievery are all dolloped out in equal portions into the donkey feed bag, I would argue.

NoDonkey on October 1, 2008 at 9:33 AM

The $700 Billion is for the purpose of bailing out foreign investors not Main Street USA. This is an outrage.

Here is partial transcript from Kudlow and Co. where Representative Brad Sherman blows the lid off this treasonous act.

Rep. Brad Sherman, D California:

Larry I am glad you have a few seconds to talk to someone who voted against this bill. I am not changing my mind. I want to thank my colleagues who stood up to the purveyors of panic and voted against a very bad bill and voted with 400 eminent economists including three Nobel laureates who wrote to us and said don’t panic, don’t act hastily, hold hearings, work carefully. The fact is Larry if you read this bill, even you would have voted against it.

It provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson’s power. There is a critique board but not really a board that can step in and change what he does. It’s a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries.

Larry Kudlow:

Let me just ask you one question. I think you are referring to foreign banks headquartered in the United States. I do not see how foreign investors get bailed out.

Rep. Brad Sherman:

Larry you have to read the bill. It’s very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn’t owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can’t buy it. It was rejected.

The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can’t be sold to the Treasury.

Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen.

Rep. Brad Sherman On Bailing Out Foreign Investors

voiceofreason on October 1, 2008 at 9:33 AM

You mess with the Clinton legacy at your own peril.

MarkTheGreat on October 1, 2008 at 9:35 AM

Funny how Dems get tons of support from the tort bar as it cripples the automakers and the Dems get tons of support from the unions as the tort bar cripples the automakers.

BuckeyeSam on October 1, 2008 at 9:31 AM

A consequence of the left’s (or the left’s followers) systematic inability to apply logic.

neuquenguy on October 1, 2008 at 9:35 AM

Published: October 26, 2006

NEW YORK: Freddie Mac and KV Pharmaceutical are among U.S. stocks that could benefit from a victory by the Democratic Party in U.S. congressional elections on Nov. 7, while losers could include Wal- Stores and Exxon Mobil.

Freddie Mac and the Federal National Mortgage Association, the two largest sources of money for U.S. home loans, stand to gain because Democrats have opposed stricter regulation for the companies. The party’s push to lower prescription drug costs might provide a lift to generic drug makers, including KV.

“The momentum is trending the Democrats’ way,” said Gregory Valliere of Stanford Washington Research in Washington. “The biggest impact by far would be the drug stocks. And the Democrats love Freddie and Fannie.”

Some one’s “fannie” is in the fire—and there’s not an “R” next to the names.

Rovin on October 1, 2008 at 9:35 AM

That cartoon-like picture taken last Monday of democrat leaders grinning when the “deal” was reached told the whole story.

You thought that image portrayed relief from hard working leaders who saved us from collapse. You were wrong. The intensity of emotion in that picture was catharsis. Last week was as close as democrats have come — in a century — to being figured out. There was a real danger that the dots could be connected between democrat ideas and social breakdown, and that the democrat party would be shut down once and for all.

Look closely at Barney Frank’s face. That’s not smile that says “I’m so happy to have done my job,” it’s the half-terrified smile of a hospital patient who’s found out he was jolted back to life by a defibrillator.

I say, buck the failout!

jeff_from_mpls on October 1, 2008 at 9:36 AM

McCain and the Republicans need to fight back and get the truth out (beyond sites like this one) before it’s too late.

AZCoyote on October 1, 2008 at 9:22 AM

They’re either gutless or stupid or both. I used to think this was a tortoise (McCain) and hare (Obama) race. Now, I see McCain as the hare waiting until a week before the election expecting to make up the ground he’s lost. Is he planning on a 10% or more Bradley effect in the swing states? Paging the McCain campaign.

BuckeyeSam on October 1, 2008 at 9:39 AM

You mess with the Clinton legacy at your own peril.

MarkTheGreat on October 1, 2008 at 9:35 AM

Yeah, just ask Vince Foster!

Laura in Maryland on October 1, 2008 at 9:43 AM

Is he planning on a 10% or more Bradley effect in the swing states? Paging the McCain campaign.

BuckeyeSam on October 1, 2008 at 9:39 AM

I wouldn’t count on even a 10% Bradley effect. Listening to fox this morning, voter fraud has already started, and given the vastly superior Obama ground organization (both for GOTV and shenanigans) we’ll need a lot more than Bradley helping us.

neuquenguy on October 1, 2008 at 9:44 AM

McCain and the Republicans need to fight back and get the truth out (beyond sites like this one) before it’s too late.

AZCoyote on October 1, 2008 at 9:22 AM

God bless you, you’re right. I find myself being drawn at an emotional level toward the argument of letting the whole thing burn, i.e., start the clock on the Obama era right now, and let America understand at a visceral level what’s wrong with collectivist ideology.

At an intellectual level, I know the proper course is to argue the merits of McCain/Palin. It’s wrong to succumb to evil to “teach a lesson.”

jeff_from_mpls on October 1, 2008 at 9:45 AM

bailing out foreign investors not Main Street USA. This is an outrage.
voiceofreason on October 1, 2008 at 9:33 AM

I was going to write something about this but decided against it. Let me just say, I think there are 2 equally likely possibilities which are not mutually exclusive:

1) I attended a talk recently that included a very senior now retired Officer at JP Morgan. That question was put to him. His explanation was, the financial service industry and market is truly global. Borders are non-existent. If you truly want to have an affect, you have to remove the assets from the global system.

2) Foreign governments, probably the Chinese chief among them, have threatened us to either make good to some degree on these bonds or they will stop lending to the US entirely.

Take your pick….

TheBigOldDog on October 1, 2008 at 9:46 AM

Does anyone remember the episode of Twilight Zone where the guy wakes up and the English language has shifted and he has to learn it all over again. Everything comes out as “over parsnip desk shake eleven and” or some such gibberish. The MSM must have the same thing in order to be able to research this stuff and come up with Republican blame.

Laura in Maryland on October 1, 2008 at 9:47 AM

This financial crisis is pretty much just a blip compared to when Social Security croaks in a few years. I remember the Democrats telling us there was nothing wrong with that either.

zmdavid on October 1, 2008 at 9:47 AM

TheBigOldDog on October 1, 2008 at 9:46 AM

That’s a dandy day-brightener!

Looks like I picked the wrong week to stop sniffing glue.

jeff_from_mpls on October 1, 2008 at 9:48 AM

Please DO NOT forget the actions of Nancy Pelosi and her “posse of destruction”:

September overview:

Let’s see, the Speaker of the House returns from a much needed five week vacation, rams through an energy legislation bill that does nothing to promote energy independence from foreign countrys or provide hundreds of thousands of American jobs—–then on BLACK MONDAY (Sept 29th, 2008) she manages to cost this nations real market value over a TRILLION DOLLARS by playing political games when she march’s around the floor of the House telling her Democrat drones to vote NO on legislation that will rescue our financial institutions. (Pelosi’s pre-vote speech didn’t help much either) In a span of just over two weeks this woman has done more economic damage to this nation than Osama Bin Laden could have accomplished in his lifetime. This is the “new direction” congress this nation voted into power in 2006……..

Rovin on October 1, 2008 at 9:49 AM

We’ve allowed them to paint us from the base point of being obviously racist greedy lying pigs for far too long.

Turn The Tables.

Dorvillian on October 1, 2008 at 9:28 AM

Especially when former community organizer and ex-lawyer for ACORN Barack Obama played a key roll in bringing lawsuits against lending institutions which forced them, under penalty of law, to violate sound business practices and lend money to people who could not or would not pay it back.

That’s socialism. On a very related topic:
That 1985 video with the defector KGB propaganda expert explaining the step by step process of how communists infiltrate and bring down countries you linked to yesterday shocked the hell out of me. I’m going to try to hunt down the original footage and use it to try to get the message out.

If you all haven’t seen this video, I strongly urge you to spend the little time it takes to watch it. It was recorded in 1985 and what that ex-KGB agent says is coming true right now.

techno_barbarian on October 1, 2008 at 9:51 AM

As long as there is a single Republican in congress, no matter what happens, it will be the Republican’s fault.

If the Democrats hold power for 100 years, no matter how bad the economy remains, it will be because of the bad economy bequethed to the Democrats by Bush.

As long as the Democrats control the media, the public will buy. Just as they still buy the myth that Hoover caused the Depression and FDR rescued us from it. You can’t find a single economist who holds to this view, but the public believes it.

MarkTheGreat on October 1, 2008 at 9:51 AM

That’s a dandy day-brightener!

Looks like I picked the wrong week to stop sniffing glue.

jeff_from_mpls on October 1, 2008 at 9:48 AM

I have no evidence for this, but, I am leaning heavily toward #2 while understanding #1 plays a role. It explains why Treasury won’t even consider any other alternatives and why they will not accept even basic limits on what they can buy, at what price, and from whom…. They have to make good on these bonds or we will be forced into a depression when they can’t sell T-bills to foreign governments….

TheBigOldDog on October 1, 2008 at 9:52 AM

Poor Franklin Raines….getting castigated this way. Hope his MILLIONS he raked in make him feel better.

Do you think Obama will exclude him from his tax increases?

originalpechanga on October 1, 2008 at 9:32 AM

No. But he will, most likely, pardon him and put him in a position of power in his administration.

techno_barbarian on October 1, 2008 at 9:53 AM

Bill Clinton is looking more and more like Boris Yeltsin these days.

Grow Fins on October 1, 2008 at 9:54 AM

I find myself being drawn at an emotional level toward the argument of letting the whole thing burn, i.e., start the clock on the Obama era right now, and let America understand at a visceral level what’s wrong with collectivist ideology.

jeff_from_mpls on October 1, 2008 at 9:45 AM

I used to subscribe to this idea. But given how effectively the MSM is re-inventing reality for the American public, I no longer have confidence that even with the Democrats holding the White House and filibuster-proof majorities in both houses the Democrats would ever be blamed for anything, the script would simply be that the Republicans screwed it up so badly with their culture of corruption in the last 30 years that it will take a while for the heroic Democrat efforts to work.
I live in NC which has been run by the Dems for over a century, and every election they run on fixing the same issues, you’d think they’d be fixed by now.
If they can sell us empty-suit Obamby has the greatest blessing this country has ever seen, they can sell us anything.

neuquenguy on October 1, 2008 at 9:55 AM

TheBigOldDog on October 1, 2008 at 9:52 AM

That makes sense. The U.S. government has a greater need to borrow money than anyone else, so it stands to reason that it would be the most affected by a credit crunch.

zmdavid on October 1, 2008 at 9:56 AM

Does anyone remember the episode of Twilight Zone where the guy wakes up and the English language has shifted and he has to learn it all over again. Everything comes out as “over parsnip desk shake eleven and” or some such gibberish. The MSM must have the same thing in order to be able to research this stuff and come up with Republican blame.

Laura in Maryland on October 1, 2008 at 9:47 AM

Never saw it, but probably have it somewhere on DVD. This indeed how I experience reporting from the MSM. It’s a feeling of unreality in which I’m not even sure we agree on basic axioms anymore. They’ll refer to the famous “Bush lie about WMD,” and it sounds like a perfectly formed sentence in the English language. Syntactically correct. And yet it doesn’t refer to anything outside the stream of consciousness of hard-left bloggers. I keep thinking, surely they could tell us what the hell they mean by this? But all you ever get is a stream of cryptic allusions to Valerie Plame and Haliburton.

I suppose some of todays angry leftists will get sick of living this way and come back to the rules of common sense and clear articulation.

jeff_from_mpls on October 1, 2008 at 9:57 AM

I suppose some of todays angry leftists will get sick of living this way and come back to the rules of common sense and clear articulation.

jeff_from_mpls on October 1, 2008 at 9:57 AM

Only after they get mugged.

Laura in Maryland on October 1, 2008 at 9:58 AM

That makes sense. The U.S. government has a greater need to borrow money than anyone else, so it stands to reason that it would be the most affected by a credit crunch.

zmdavid on October 1, 2008 at 9:56 AM

So far it seems the further the markets move into turmoil the cheaper it gets for the US government to borrow money.

dedalus on October 1, 2008 at 9:59 AM

I wouldn’t count on even a 10% Bradley effect. Listening to fox this morning, voter fraud has already started, and given the vastly superior Obama ground organization (both for GOTV and shenanigans) we’ll need a lot more than Bradley helping us.

neuquenguy on October 1, 2008 at 9:44 AM

I agree. I’ve been concerned about this for a while. The WSJ has a first section article offering a little hope that though first-time voters are going 2 to 1 for Obama, only about half of them expect to vote. WTF?

Anyway, nobody cares about McCain’s foreign affairs resume. Unless something dramatic erupts at home or abroad (not advocating that), that aspect of McCain’s background is entirely irrelevant to swing voters for the next five weeks. McCain’s made no coherent argument for reform. McCain has to scorch-earth Obama on as many domestic issues as possible. I got torched yesterday by a couple of HA commenters for being too glum, but McCain seems to be a dead man walking. I don’t see another Lazarus act in the offing.

BuckeyeSam on October 1, 2008 at 10:05 AM

Another great Ad that appears to be having no success. Why? Because McCain refuses, to this date , to take ownership of the message. I believe with just a month to go McCain has to stop letting his video crew, a very good crew, speak for him. He can no longer deliver his message to arranged adoring crowds. He has to deliver the message to Obama personally.

From my posting last night

All these investigative stories have no value unless McCain literally gets in Obama’s face with them during a debate.

And I mean gets in his face–call him out with a personal attack saying his background affiliations with Wright, ACORN, Ayers, Rezko etc are repugnant. His being on the dole with Fannie, Freddie and AIG being reprehensible. That he is not qualified to have a say in any solution as having personally benefited from possible criminal behavior by the firms in question. He has to bring up his being nurtured by the most corrupt political machine in history in Chicago. He has to personally blame Obama for the smear campaign against Palin.

He has to tell him his personal associations and actions that he sanctions disqualify for President. He has to get real close to him and tell him in no uncertain terms that he is a phony who has accomplished nothing in his political career, a career spent solely on personal advancement. He has to point at him when he speaks never looking at the moderator. He has to call out Frank, Dodd and Pelosi. He has to say that while he has voted with Bush 90% you have voted with Pelosi 97%. That the lot of them are earmark pigs with more coming if Obama is elected.

He has to figuratively get inches from his face and read him the riot act. He has to be Patton.

Short of that McCain has no chance of being President.

patrick neid on September 30, 2008 at 7:44 PM

patrick neid on October 1, 2008 at 10:06 AM

Clinton was always the smartest man in the room. Can’t take that away from him.

Ahhh, the good old days. Salad days.

connertown on October 1, 2008 at 10:10 AM

Glass-Steagall is nothing more than a red herring for the ignorant.

Perhaps they should all stop chasing after red herrings and go after the really big fish responsible for this whole mess.

Have them start off with Big Tunas Barney Frank and Chris Dodd, and then just work their way up the food chain.

pilamaye on October 1, 2008 at 10:12 AM

patrick neid on October 1, 2008 at 10:06 AM

You reverend, me choir. The man needs to stop worrying about civility and work on communication. It is an uphill battle with the MSM acting as Obama’s personal smear machine. (Pretty lady has job as lobbyist = McCain affair, but a hotel rendevous with babymama = Edwards concern for single mom is no one’s business.)

Get Morris and/or Rove actually working on this and let the country know what kind of lies we are being told. Emperor Obama is naked!

Laura in Maryland on October 1, 2008 at 10:14 AM

It’s time to stand up and hold these people accountable. It’s time to approach the media and the democrats from the standpoint that they have been liars and hypocrites in the past and must prove their assertions from that benchmark.

We’ve allowed them to paint us from the base point of being obviously racist greedy lying pigs for far too long.

Turn The Tables.

Dorvillian on October 1, 2008 at 9:28 AM

For the sake of our democracy we need a way to hold the media in particular more accountable. And don’t tell me that we have had a biased press all of our history. May be so but they did not have the means of mass distribution diverse medium they have today.
Of course a free press is essential and that is why they receive special privileges as the 4th state but with the privilege comes responsibility. It needs to be a grass-roots movement, because every time a politician tries to point out their bias they respond by accusing people in power to try to influence the media.
Perhaps we need “Citizens for the Defense of Democracy through a Fair Press” organization, with lots of for public campaigns, and put TV and newspaper adds out every day clearly exposing double-standards and bias. Just dreaming a little….

neuquenguy on October 1, 2008 at 10:18 AM

Even Bill Clinton is not telling the full story of Gramm-Leach-Bliley. Prior to GLB, the U.S. banking and investment banking companies were in danger of being eclipsed by foriegn banks as the preferred home for major investment dollars. The U.S. banking system was antiquated and fragmented because of Glass-Steagall. The U.S. was the only major nation that prohibited integration of financial services. This was resulting in middling profits and the loss of billions in deposits and investment dollars from corporations as well as wealthy individuals. Bill Clinton and Congressional Democrats believed the modernization of U.S. financial regulation was similar to NAFTA, a free-treade measure that would make U.S. banks more competitive and help to attract more investment capital from around the world to the U.S. And that’s exactly what it did.

The event that really sparked the change was Citibank’s attempt to buy Travelers Insurance. Glass-Steagall prohibited that purchase, though the Fed allowed it on the assumption that eventually the law would be changed.

Following that purchase, oddly enough the other major banks did not follow suit and buy insurance companies, nor did they buy investment banks. It’s hard for me to understand what effects of “deregulation” Democrats are talking about as being caused by GLB. The big mistakes made were the investment banks buying mortgage companies, and as far as I know they could have done that wthout GLB because they bought mortgage companies that were not depositories. The rise of mortgage securitization started in the 1980s and was going full tilt beefore GLB. The derivatives market was developing before GLB. The use of structured investment vehicles and credit default swaps was not a rsult of GLB.

GLB did not “deregulate” the banks. Banks continued to hve capital requirements and safety and soundness rules and were subject to examinations by their regulators after GLB as they were before. GLB changed the definition of financial services in which they were allowed to engage.

Investment banks like Goldman Sachs and Lehman were never diectly federally regulated as banks, but were supposed to be regulated by the SEC. If there is a regulatory culprit in all of this, other than the Fannie Mae regulatory disaster, it is the SEC’s failure to keep up with the derivatives and credit default swaps, and the abolition of the uptick rule and rules against naked short selling.

This is pure demagoguery by the Democrats, as well as major CYA to change the subject from their own culpability in the Fannie-Freddie disaster.

rockmom on October 1, 2008 at 10:20 AM

neuquenguy on October 1, 2008 at 10:18 AM

The dems have already beaten us to the punch demanding fairniess in radio. It is the one place we can get through the lunacy and get real information, so they are trying to shut down it down or make talk radio provide liberal shouter-downers to drown out conservative voices.

Laura in Maryland on October 1, 2008 at 10:24 AM

He has to figuratively get inches from his face and read him the riot act. He has to be Patton.

Short of that McCain has no chance of being President.

patrick neid on September 30, 2008 at 7:44 PM

patrick neid on October 1, 2008 at 10:06 AM

Yes, why not ask Obama in the next debate: “Can you assure the American public that you will not name as you secretary of the treasury Franklin Raines, one of your top economic advisers who is currently under investigation for his major role in the financial crisis?” and make him answer. wouldn’t it be nice?

neuquenguy on October 1, 2008 at 10:27 AM

Bill Clinton is getting closer and closer to an all-out endorsement of John McCain. What would it take to push him over the edge? I’m thinking just one more shot at his legacy from the Obots and he will join the PUMAs. Glass-Steagall criticisms from the Obots are really stinging his butt, to be sure. This entire election is just so Machiavellian. I just wish the GOP would stop playing nice and start hammering away at the truth about The Most Holey One and his minions.

either orr on October 1, 2008 at 10:27 AM

Th nutroots that powered Obama to the Democratic nomination hate Bill Clinton. They think he is essentially a Republican. GLB to them is anathema just as is NAFTA and welfare reform. They hate markets, they hate capitalism. They are delusional.

Chuck Schumer spinning his head off on CNBC.

rockmom on October 1, 2008 at 10:35 AM

The dems have already beaten us to the punch demanding fairniess in radio. It is the one place we can get through the lunacy and get real information, so they are trying to shut down it down or make talk radio provide liberal shouter-downers to drown out conservative voices.

Laura in Maryland on October 1, 2008 at 10:24 AM

Yes, but the government has no business getting involved in defining and enforcing “fairness”, that’s just government using their big stick to suppress free speech. However citizens can expose the bias and dishonesty of the media (like Rush et all do) unfortunately talk radio can be discredited by the same mass media and seems to mostly reach the converted.

neuquenguy on October 1, 2008 at 10:41 AM

“That’s socialism. On a very related topic:
That 1985 video with the defector KGB propaganda expert explaining the step by step process of how communists infiltrate and bring down countries you linked to yesterday shocked the hell out of me. I’m going to try to hunt down the original footage and use it to try to get the message out.

If you all haven’t seen this video, I strongly urge you to spend the little time it takes to watch it. It was recorded in 1985 and what that ex-KGB agent says is coming true right now.

techno_barbarian on October 1, 2008 at 9:51 AM”

techno,

Scary stuff. I watched the video. I see everything the KGB agent said. The main “take away” I got, was that for those who have been “programmed” by Marxist thought, as some of my friends and family have become, there is no set of facts you can put in front of them to change their minds. Obama is “The One.”

Star20 on October 1, 2008 at 10:45 AM

Democrats don’t want to talk about the real problems at the heart of this crisis.

Apparently, neither does McCain.

I simply don’t understand the way McCain has conducted himself in the past two and a half weeks. If he’s keeping mum for the sake of bipartisan cooperation in the bail-out bill, great. The bail-out will get enacted, and McCain will lose in a landslide.

McCain has needed to explain how, when the GOP had power, the Dems were still able to block Fannie and Freddie oversight. And then he needs to explain how he’d prevent that kind of thing from happening again.

He hasn’t, it’s unclear whether he will, it’s even more unclear whether a Johnny-come-lately explanation will have any effect on swing voters, and he’s going to lose because of his inaction.

BuckeyeSam on October 1, 2008 at 10:58 AM

This is pure demagoguery by the Democrats, as well as major CYA to change the subject from their own culpability in the Fannie-Freddie disaster.

rockmom on October 1, 2008 at 10:20 AM

You’re right rockmom, but with the MSM in lock-step with the Dims, most of the voting public is never going to know the truth. I can’t understand why McCain and the Republicans aren’t screaming about this at the top of their lungs at every opportunity.

AZCoyote on October 1, 2008 at 11:01 AM

I remember specifically when glass-steagall was repealed. The only reason for the repeal was Citibank wanted to buy Travelers insurance.

The laws said that banks couldn’t buy insurance companies. They changed the law to create ‘Citigroup’. That’s why the new logo is the red ‘umbrella’ over the ‘t’ in Citi. Travelers had a red umbrella logo.

I remember that everyone was saying that the deal couldn’t go through because of this law. Then 6 months later, bingo presto, they changed the law and the deal was done.

When DC says they are looking out for the American people, they are lying. They look out for what will get them re-elected no matter how. Big money donors help buy lots of ads so they get preference.

ThackerAgency on October 1, 2008 at 11:01 AM

Democrats are the problem, nothing good ever comes out of their socialist solution.
Albert Einstein said “you can not solve problems if you keep using the same methodology that started the problem.”

pukara61 on October 1, 2008 at 11:06 AM

rockmom on October 1, 2008 at 10:20 AM

ROCKMOM—-AGAIN,YOU ROCK!

(would like to copy and paste to my site with permission and credit of course)

Rovin on October 1, 2008 at 11:14 AM

Thanks for the history and econ lesson, Ed. I learn so much from conservative bloggers.

Christine on October 1, 2008 at 11:15 AM

I agree with Rovin…(rockmom is the bomb)…I learn a lot from the brilliant posters as well.
Why do the Demos get away with their twisted lies? They aren’t held responsible and once you have that kind of power nothing short of an act of God can stop them. Actually, they think they are God(s), so that doesn’t help either.

Christine on October 1, 2008 at 11:35 AM

Ed, with all due respect, you really have absolutely no idea what you are talking about. The wildly “overvauled” Mortgage Backed Securities weren’t issued by Fannie and Freddie. you know this is a terribly complicated crisis and folks like you that don’t do their homework and yet go ahead and dispense information onto the web really do a disservice to the country. It was private Wall Street bond traders that created and peddled in these so called “wildly overvalued” MBS’. Of course, by wildly overvalued, what that means is that the inherent mortgages were extremely aggressive and frankly just plain irresponsible. Fannie and Freddie bought up a lot of these mortgages which is scandalous since that has nothing to do with their mission of creating liquidity in the market as a whole. It’s too bad that 99% of the commentators that comment on this crisis know so little about it. Stick to something you know Ed because you are contributing to the problem with each and every post on this crisis.

mike volpe on October 1, 2008 at 11:50 AM

Let me get this right, the Dems are saying that the reason they have acted so recklessly during the past 8 years by profiting from and denying the problems with Fannie and Freddie is because Glass-Steagall was repealed in 1999(while a Dem president was in office)?

Rick on October 1, 2008 at 1:11 PM

To understand what drives this type of activity you might read this excellent presentation from American Thinker. It helps understand the overarching strategy.

FoByFo on October 1, 2008 at 1:31 PM

john mccain supporter, bill clinton knows what he’s talking about.

venicesurfer on October 1, 2008 at 3:07 PM

I think McCain’s waiting for the last week before the election to unleash a broadside attack with all the material he’s accumulated.

That way the MSM won’t have enough time to cover for Obama.

Jester on October 1, 2008 at 3:41 PM