Everything you say is true. Deregulation and failure to impose even minimal oversight created a climate that produced this catastrophe. And even with passage, other factors needed to come into existence for this catastrophe to unfold. Bush, the GOPers, and corporate greed and incompetence are the most proximate causes.
Still, I do wish the President had listened in 1999 to the consumer advocates and the watchdogs who cautioned against his support. The lax oversight could not have created as large a problem if Glass-Steagall had not been repealed. This was, afterall, the rationale for its passage, to preclude to much integration across all financial services creating the likelihood of relatively rapid meltdown. The bill in question also did more than merely repeal Glass-Steagall
Please do not read me as taking Bush and the GOPers off the hook.
But I do think people should bring some serious thinking to this issue and not merely take it up as a political cudgel, though we definitely should do that as well.
On October 2, 2007, Rep. Barney Frank's Committee on Financial Services held a hearing titled "Systemic Risk: Examining Regulators' Ability To Respond to Threats to the Financial System" (Y4.F49/20:110-65).
At this hearing economist Bob Kuttner, an editor and co-founder of The American Prospect and a fellow and the Economic Policy Institute gave the following testimony:
" second parallel is what today we would call securitization of credit. Some people think this is a recent innovation, but in fact it was the core technique that made possible the dangerous practices of the 1920. Banks would originate and repackage highly speculative loans, market them as securities through their retail networks, using the prestigious brand name of the bank - e.g. Morgan or Chase -- as a proxy for the soundness of the security. It was this practice, and the ensuing collapse when so much of the paper went bad, that led Congress to enact the Glass-Steagall Act, requiring bankers to decide either to be commercial banks part of the monetary system, closely supervised and subject to reserve requirements, given deposit insurance, and access to the Fed's discount window; or investment banks that were not government guaranteed, but that were soon subjected to an extensive disclosure regime under the SEC. Since repeal of Glass Steagall in 1999, after more than a decade of de facto inroads, super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s - lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way. And, much of this paper is even more opaque to bank examiners than its counterparts were in the 1920s. Much of it isn't paper at all, and the whole process is supercharged by computers and automated formulas. An independent source of instability is that while these credit derivatives are said to increase liquidity and serve as shock absorbers, in fact their bets are often in the same direction - assuming perpetually rising asset prices - so in a credit crisis they can act as net de-stabilizers.
The current crisis was triggered by the sub-prime mortgage panic, but it might as easily have been sparked by a hedge-fund collapse or a run on the dollar. The vulnerabilities are system-wide. Since it began with sub-prime, let's start there.
When the housing market turned soft, mortgages started going bad, and investors headed for the exits. The stocks of mortgage companies plummeted; the banks that lent them money took hits; hedge funds that invested in their bonds lost money, too -- a chain of events rather like the poem about the war lost for lack of a horseshoe nail ("For want of a nail, the shoe was lost, for want of a shoe, the horse was lost, for want of a horse, the rider was lost ..."). This variant on The House That Jack Built was a house of cards. Thanks to deregulation, these several realms are interconnected. Inflated assets in real estate, the bond market, hedge funds, and private equity feed on each other.
The Roosevelt schema of financial regulation was built around two principles -- disclosure and outright prohibition of inherent conflicts of interest. All publicly listed and traded companies were required to disclose to the Securities and Exchange Commission and to the public all financial information deemed "material" to investor decisions. The New Deal also prohibited stock trading based on insider information, and it created structural barriers against the kinds of temptations that ruined the economy in the 1920s. The most notable of these was the 1933 Glass-Steagall Act, which prohibited the same financial company from being both a commercial bank and an investment bank.
The Glass-Steagall wall was devised to prevent a repeat of the 1920s' scams, in which banks made speculative investments, turned the debts into securities, and sold them off to unsuspecting investors with the blessing of the bank. With Glass-Steagall, commercial banks were tightly supervised and given access to federal deposit insurance, to keep savings secure and prevent runs on banks. Investment banks, meanwhile, were not government-guaranteed and were free to do more speculative transactions for consenting adult customers. But Roosevelt's newly created SEC subjected securities markets to much tighter structures against self-dealing and insider conflicts of interest.
So the crisis could have been triggered by any one of a number events, including the incredibly lax oversight, but what made the entire system fragile, to a substantial degree, was the repeal of Glass-Steagall.
Again, please do not read me as letting the GOPers off the hook. All I am suggesting is that we carefully consider the possible proximate and indirect causes of the current crisis, mostly because we need to understand how to stop it and prevent it in the future. It goes beyond politics, I think. Thank you.
By all means, worship at the alter of He Who Can Do No Wrong.
I prefer supportive criticism and pursuing the truth. The President did an amazing amount of good, but he had his flaws. Greatest among them, in my opinion, was his very consistent support for much of the corporate agenda even in the face of substantial opposition within his own party and from progressives.
Most of the Democrats in the Senate saw the potential harm this deregulation would create. Unfortunately, the President did not. Most of the consumer rights organizations were opposed to the bill. Unfortunately, the President was not.
I am not blaming this collapse on Clinton or a single bill passed nearly 10 years ago. The diarist accused McCain of doing nothing while his friend Gramm pushed through the repeal. That was poor judgment on the part of McCain.
I merely had the temerity to point out that the President supported the bill, presumably exercising judgment on that issue that was at least as poor. It would not have become law without the President's signature. Not saying it is because of that signature we have our current problem.
We are in a world of hurt when even indirect criticism of someone unnamed is beyond the pale. We are not morphing into lockstep like the GOPers, I hope.
All for pinning this financial meltdown on the GOPers and putting into the White House someone who will support re-regulation by Congress.
I just wanted to note one thing. Diarist accuses McCain correctly:
Because he stood by and quietly approved as his friend Phil Gramm moved to dismantle the Glass-Steagall Act that used to regulate the financial sector, we couldn't prevent the kind of disaster we're seeing unfold today
McCain stood by quietly...
Gramm's bill became law on 12 November, 1999. To become law, the President's signature was required. Who was that President?
I'll be interested to hear about your conclusions when you have finished reading the book.
In a sense, what he and we mean might turn on the sense of rational we adopt. For instance, I do not equate unconscious to not rational. Quite the contrary, as I alluded to in this comment on Armstrong's recent diary about Lakoff: http://www.mydd.com/comments/2008/9/12/6
Highly self-reflective deliberation is not required for decision-making to be rational, especially given that so much of our decision making is a function of (or heavily influence by) mental modules that operate across a large number of social and environmental regularities we confront as human beings, including unpredictability and limited information. While I am not wholly on board, my view is influenced by the works of Cosmides and Tooby and other evolutionary psychologists.
If I could rate this comment up a dozen times I would.
Sadly, many in our own party have played a role in the purges, then and since. All of us in the party and progressive movements more broadly have to fight for every desirable change and defend every major achievement we can, but I do feel that major success on the economic front would open up major progress on other issues. From the other direction we get a little of latter and almost none of the former. The last sentence in your second paragraph is the reason and a profound summation of the dynamics.
You expressed the essence of my view on this question better than I could.
Mostly the story repeated the facts included in Steve M's diary.
The story differed from part of the current front page post in one way. They reported that the MI GOP strongly denied that there was any truth whatsoever to the story; it must be true. The FREEP story linked in the Orton diary includes the same type of categorical denial. The WDET story and the GOPer denial both specifically referenced the online Michigan Messenger source Steve M cited.
The story also indicated that MI election law allows folks to vote at their old address and precinct if they have not registered at their new address. This would imply that even if they no longer live at the foreclosed home, they should likely have the option of voting as if they did, at least for a period of time. My cursory search of the election law did not uncover a period by which one must re-register, but it stands to reason there is such a requirement. The new law only requires that the photo ID match the address on the rolls.
Avoiding foreclosure is not a requirement to vote, so if they have not moved from the foreclosed residence, there is not eligibility issue. A family down the street (Hamtramck; County of Wayne) stayed in their foreclosed home for at least half a year. Nobody can sell anything here, so there is not much incentive to boot homeowners if the lender can get something out of them.
The WDET story did include a comment from a voting rights activist that the publicizing of this incident locally may cause some to choose not to vote to avoid the embarrassment of having the foreclosure/eligibility issue surface at the polls. It is also possible the confusion arising form the a**hole GOPer poll intimidation challenges will slow things down and result in people walking away.
A few potentially relevant sections of the code:
168 Sec. 507a(1) A registered and qualified elector of this state who has moved from the township or city of a county in which he or she is registered to another township or city of a different county within the state after the sixtieth day before an election or primary election shall be permitted to vote in the election or primary election at the place of last registration upon the signing of a form containing an affidavit stating that the move has taken place. This subsection shall apply if the county in which the elector is registered has implemented the county file as the official file pursuant to section 509e.
168 Sec. 509aa(2)(c)If the voter has moved his or her residence within the city or township and does not complete and return the card to the clerk with a postmark of 30 days or more before the date of the next election, the voter will be required to vote in his or her former precinct of residence in the city or township. The voter will also be required to submit an address correction before being permitted to vote.
Perhaps articles from his co-POWs and fellow veterans about how they are too scared of his temperament if given access to the button?
Is third party and folks in a position to personally know something about McCain.
It doesn't say he is some kind of lying ogre, just not possessing the personality this one particuar job merits.
Doesn't require your GOPer friends to say their party is full of it or anything of the sort.
You require some life-saving surgery in the near term. There are two doctors. One you don't like so much as a person, but his demeanor and those vouching for him is that he stays calm in the OR and reads up on the med lit. The other is your friend you have known a long time and think he looks at the world pretty much the way you do. But he is a bit of hot head who makes quick judgments and sometimes is a little hot to his co-workers. He also acts from his gut and experience rather than boning up on the latest thinking.
I have a question for the several folks posting up thread commenting that Lakoff's perspective represents a cynical view of the electorate. I understand, and partially embrace, that criticism.
But ultimately I do not think it is a cynical view and here is why (caveat: his view may not be accurate but I'm thinking it is not cynical).
It would be cynical if he is saying Americans are too stupid to evaluate issues carefully and render a deliberative judgment about the relative merits of candidates. And serious cynicism follows from that characterization if one concludes that those stupid jackasses need to be appealed to using idiotic, lowest-common-denominator pandering. That is a hyperbolic summary of the views up thread.
But I do not think that is what Lakoff is saying. Remember, he is issuing this view of politics on the foundations of his work as a cognitive scientist and linguist, a very accomplished one at that. His views of politics derive from a view about how the human brain functions and processes information. That view may not be correct, but the conclusion that follow from that view cannot be fairly characterized as cynical. It is essentially a polemical claim resting on empirical foundations.
This is picked up in the second to last passage Armstrong quotes:
Voters are smarter. Since they don't know what the situation will be in a couple of years, it is rational to ask if a candidate shares your values, if he's saying what he believes, if he connects with you, if you trust him, and if you identify with him. That is a rational thing to do. Not just a matter of personality.
I would translate this thusly: because experience suggests that the future in general and the future behavior of politicians engaged in rule-making in particular cannot be accurately or confidently predicted, the most rational assessment tool is to try and determine if candidate's a worldview, basic judgments, decision heuristics, etc., basically map to your own, suggesting they will respond to changing and unpredictable circumstances as you would, or at least in a manner you might find comfortable.
The brain can be viewed as comprised of set of modules, if you will, that have evolved to address recurring circumstances in the environment, including the fact of unpredictability and limited information. Modules make decision making possible in the face of that environment. That is possibly part of the foundation for the "thinking in metaphors" claim he makes.
Again, I am not saying I necessarily agree with all this, just that it is worth thinking about and not dismissing as self-evidently cynical.
According to several participants on both sides, planners considered nuclear war to be a highly probably outcome if the United States rejected Khrushchev's offer early on to remove Soviet from missiles from Cuba if the US removed its missiles on the Iranian-Soviet border, that is, closer to the USSR than Cuba is to the US.
A few points.
First, Graham Allison in Essence of Decision, 1971, wrote that planners believed that should war ensue that around 100 million Americans and 100 million Soviets would die. While this estimate was being bandied about on the US side, Pres. Kennedy himself put the chances of such a conflict at 33-50% if the US rejected Khrushchev's offer.
Second, the missiles in Turkey the Soviets wanted removed had been slated for removal six months earlier because missiles on the new Polaris submarines made them obsolete. Before the Soviet offer, the US had already made plans to remove the missiles from Turkey, though the offer had not yet been carried out.
The US rejected the offer to simultaneously remove the missiles from Cuba and the obsolete missiles in Iran.
That means a part of the decision-making apparatus you applaud entailed accepting a risk the planners themselves believed carried a one in three to one it two probability of a war killing 200 million people. That was their estimate of odds and carnage.
They did so to reject removing missiles from Iran they had already planned to remove. That Khrushchev later backed down and the US later agreed to quietly remove the missiles in Iran the next year does not change the fact that US planners willingly and knowingly took a risk earlier in the crisis that they believed very well could culminate in the worst catastrophe in human history.
I have a very hard time accepting that as a glorious moment of US diplomacy. This sets aside the fact that Kennedy ran to the right of Nixon on foreign policy in 1960 - running on the fraudulent missile gap at a time US planners believed the Soviet's had fewer than 10 nuclear bombs they could deliver to the US soil, more probably closer to four while the US had many hundreds that could reach every major Soviet city and military facility several times over.
Let's not even talk about Kennedy's Bush-Reagan like trickle down tax cuts or Bobby's advice to MLK to step back on the non-violent protests. Don't get me started on the Alliance for Progress that set the stage for the Latin American death squads in the 1970s and 1980s.
JFK's very real accomplishment's should not obscure his very large problems. Mythologizing is not history.