Barack Obama may have trouble getting his #2 at Treasury confirmed, and not necessarily from Republicans. Neal Wolin worked on the Treasury team that drafted the Gramm-Leach-Bliley Act, which Democrats like Barney Frank and Chris Dodd blame for the economic meltdown. From the Left, Greg Sargent has noticed the connection, but has begun rehabilitating the legislation:
Tim Geithner’s new nominee for number two at the Treasury Department, Neal Wolin, played a key role in drafting legislation in the late 1990s deregulating the banking system, a former Treasury Department official confirms to us.
The law that Wolin helped draft has been blamed by some critics for easing up regulatory pressure on huge financial institutions, tangentially helping create today’s mess — and his role drafting it could come under questioning at his upcoming confirmation hearings.
Our reporter, Ryan Derousseau, came across Wolin’s role in researching our big profile of Wolin at WhoRunsGov.com. Stuart Eizenstat, a deputy Treasury secretary under Bill Clinton, confirmed that as Treasury’s general council at the time, Wolin “provided the technical and legal drafting” for the Gramm-Leach-Bliley Act.
As Ryan writes, the Act hasn’t been directly blamed for today’s meltdown. But it did pave the way for the birth of huge financial companies like Citigroup that were deemed “too big to fail” when their mortgage bets went belly-up and the credit market evaporated. The government, of course, had to bail out these institutions with billions in taxpayer dollars.
That’s quite a change in tone, if the Left picks it up from Sargent. In the weeks following the crash, Democrats used Phil Gramm as their scapegoat, shifting the blame from the heavy government intervention in the market to the Gramm-Leach-Billey Act. Democrats to this day insist that the crash came from “deregulation”, and the GLBA had been Exhibit A for that defense of the Community Reinvestment Act and Congressional mandates to Fannie Mae and Freddie Mac to buy and securitize subprime loans, which actually created the false bubble and crash.
Wolin has other problems, which I noted in January when Wolin first joined the Obama administration as Obama’s chief legal counsel on the economy. Wolin ran The Hartford’s Financial Services Group, and bought a thrift in Florida in order to get TARP money. Under Obama’s lobbying rules, Wolin should have nothing to do with Treasury’s bailout activities, which calls into question what Wolin will do at Treasury. Park Tim Geithner’s car?
Republicans ought to go after Wolin when he appears for his confirmation hearing. Having Democrats on the committee defend his work on the Gramm-Leach-Bliley Act will be quite entertaining, and could help kill the popular meme on the Left that Gramm is responsible at all for meltdown. I suspect a few Democrats may already be wondering what Obama was thinking in pushing Wolin into this position.