All Right, So It’s Over
I fought the good fight from my tiny perch, but with 59 votes in the Senate and with Sherrod Brown on his way to cast #60, it’s clear that the stimulus bill will pass, watered-down protectionism and all.
I’m disappointed, but I’m not the type to hope for something bad to happen just so I’m vindicated.
I sincerely hope that the protectionism in this bill is watered-down enough that it DOES NOT cause a backlash, and I sincerely hope that the stimulus provides just that – a stimlus to our beat-down economy (for $800 billion, it better!).
In other words, I sincerely hope I’ve been dead wrong on this one…
A lot of people fault and we sit tonight to lick our wounds. But we have a new leader (Steele) and a new resolve. States are considering taking back their rights, so the fight has just begun.
And remember the government takes a lot of red tape for itself to get through. By 2010, we may not have to worry too much if we get the Congress back and neuter “The One”‘s power.
Classy, to the very end.
Jacques, it’s unfortunate Sherrod Brown had to leave his mother’s wake, there’s no doubt – but surely a senator shouldn’t have to vote against his conscience on a $800 billion piece of legislation…by saying that, I mean in no way to trivialize the personal loss of Brown…couldn’t the vote have just as easily been delayed? The deadline imposed by Obama is arbitrary, after all…
Mark: the idea that every GOP in both houses of Congress — with three exceptions — voted their conscience and partisanship had nothing to do with it is risible.
Let’s not forget that the Republicans who have suddenly discovered fiscal responsibility are the same ones who turned a budget surplus into the largest deficits in history, largely by borrowing money to pay for $2 trillion in tax cuts. Not only does this number dwarf the amount in the stimulus bill, but it had no discernable effect on the economy, which had anemic job creation over the past eight years. We didn’t need tax cuts, but there is no doubt that we need a stimulus bill — and probably one much larger than the one we got.
Let’s also not forget that with lax regulation and voodoo economics, these are the same Republicans which created the worst economic crisis since the Depression. One would think that they would at least show some remorse about having proven themselves to be incompetent stewards of both the economy and the Treasury, but instead they had no alternative to offer except grandstanding.
Where was the vaunted Republican conscience when they were trashing the economy?
Nor should we forget that Obama made a genuine effort to bridge the gap between the two parties and incorporated Republican sugggestions into the bill, including eliminating programs they opposed to and adding billions of dollars to fix the AMT. Nothing wrong with fixing the AMT — but it has nothing to do with stimulating the economy. For which Obama got nothing from the other side. Nada. Zippo. Nor should we forget that the Republicans who are (falsely) whining that they were left out of the legislation were the same ones which completely shut the Democrats in the six years when they controlled the White House and both houses of Congress.
I give Obama and the Democrats a lot of credit for taking action in the face of nearly absolute opposition by the Grand Obstructionist Party. Had the Democrats acted in the same fashion as the Republicans, they would have unanimously voted against the invasion of Afghanistan, the AUMF, the prescription drug bill, the Supreme Court appointments, and other Republican initiatives. It’s true that they voted against some of Bush’s more wacky ideas, such as privatising Social Security and putting the money into the stock market. Lucky thing that never came to pass.
So what you have is a bankrupt party, bereft of ideas, thoroughly humiliated in the last two elections, which is playing to its base. They can’t come up with any intelligent ideas, so all they can do is say No. Government is too important to let Republicans play a role in it — Obama should abandon any hope of bipartisanship and exclude the GOP from any meaningful role in governance. They have nothing to offer and their intent is to impede rather than to help get out of the many disasters which they left for Obama to solve.
To pretend that conscience has something to do with this — when that conscience was notoriously absent for the past eight years — is an absurdity too gross to be insisted upon.
As for delaying the legislation and Sherrod Brown:
There is nothing arbitrary about getting the legislation passed as quickly as possible. David Gergen was on CNN today saying that when your house is burning down, you put out the fire as quickly as you can, even if there is some leakage. You don’t stand around looking at the hose. 600,000 people lost their jobs in January, and a similar number may very well lose theirs this month. When you have an economy in a death spiral, the only intelligent reaction is to act quickly and aggressively, not to get bogged down in minutiae like whether we should spend a few million dollars to renovate the National Mall.
Re Brown: you are, of course, correct that there was no reason for Brown to leave his mother’s funeral to go to Washington. One would think that there would be at least one Republican Senator with the class to say that although he opposes the legislation, he will abstain so Brown could stay in Ohio. Jacques is right: classy to the very end.
Glad to see we are so very concerned about Mr. Brown’s circumstances. Let me get this straight, McConnell is the bad guy for, what exactly, oh, right, not changing his or some other Republican’s vote so that Brown doesn’t have to cast a vote. Obama and the Democrats, who are forcing the vote rather than waiting a couple of days, have no culpability in this “travesty”. Gotcha. Well, Gergen did say that our house is on fire and we must act now, so it must be true I guess.
Yes, yes, by all means, waiting a couple of days so that Sherrod Brown could return and Congress could, say, READ the 1,067 page summary of the frickin’ legislation would have been irresponsible…
And you can rant all you want, Peter, but McConnell (or any Republican senator) should ALWAYS vote his conscience…as sad as Brown’s personal circumstances were, this is serious business that concerns 300 million plus Americans…and abstaining would not have been enough – it takes 60 votes to be filibuster-proof…or am I wrong there? Maybe the rule is 60 percent of however many are actually present and voting…
And one last thing – it’s not to the credit of the Democratic party that only 7 House Democrats and not a single Senate Democrat voted against the bill. The protectionism alone should have been a deal killer for at least ONE Senate Democrat…but that has nothing to do with partisanship, does it? Only evil Republicans are partisan…
But maybe you and Gergen are right, Peter, and this couldn’t wait until Tuesday – in fact, I bet a LOT of these programs will be breaking ground during this President’s Day holiday weekend…
Not at all.
1) McConnell has nothing to do with it. Any single Senator could have said that he is opposed to the bill, but will vote against a filibuster in deference to Brown’s circumstances. It would have been a humane, decent gesture.
We all know that if Ted Kennedy’s vote were required, he would have left his sickbed to go to Washington. We also know that the result would have been the same: no Republican would have voted against a filibuster, which is a political stunt which would have failed anyway. Shame on them.
2) It’s pretty obvious that the Republicans have made the political calculation that they want Obama to own the stimulus bill, and then hope that it fails so that they have something to talk about in 2010. They have nothing to talk about now: their only suggestion for resolving the economic crisis which is largely the result of Bush-era tax cuts is — guess what? — more tax cuts.
One way to ensure that it fails is to continually delay its passage. First they nitpicked it to death, which is easy to do for an appropriation bill of this size. They complained about the contraception issue: fine, it came out. They complained about renovating the National Mall (I’m still scratching my head to understand why it is wrong and why it isn’t stimulus). That came out too. Now they are using the size of the bill (all bills of that size are ridiculously long, and they wouldn’t have read it anyway if the bill were delayed until Tuesday) and Brown’s circumstances as phony excuses. Doubtless they would have thought of something else next week too.
The situation is so serious that a delay of even a few days does make a difference. Delaying passage of the stimulus bill will also delay consideration of the banking legislation, which is the next agendum in fixing the economy. If there was a competing vision from Republicans, then maybe there would be reason to delay it yet again. But this is what we’ve got, and sometimes you have to bite the bullet. A bill of this magnitude will always have elements that not everyone likes. I give Senators like Ben Nelson credit for stomaching his disagreements so something gets done. Without unanimous Democratic support, the bill would have died and the economy would continue its death spiral. I’m sure that there are Republicans who really do believe that it is better to do nothing, and let the economy continue to tank, than to pass a large stimulus bill. However, the notion that not a single one of nearly 200 House Republicans was willing to challenge Rush Limbaugh and the Republican House leadership to do something to fix the economy because they all suddenly got religion about deficit spending and voted their newly found consciences to be ludicrous. If that’s not partisanship, I don’t know what is.
You are demonizing your political opponents, Peter. There are some people who say adding $800 billion onto a record budget deficit is irresponsible. There are some people, like yours truly, who refuse to support protectionism under any circumstances. There are some people who are being partisan. All of these things come into play.
I repeat: NOT A SINGLE SENATE DEMOCRAT was troubled enough by the return to blatant protectionism to vote his or her conscience. Is every Democrat that economically illiterate? I doubt it…so that leaves raw partisanship. That’s at least as deplorable as anything the Republicans have done here.
This stimulus is not the be-all and end-all of trying to fight this economic trough. It would be much more responsible to have slowed down debate to get this thing right (there’s no possible way this bill could even have been read by anyone prior to passage).
Were I in Congress, I would have voted no on the basis of protectionism alone. People like you would have thrown stones at me for fiddling while Rome burned. Fine…will you stand up and take the responsibility if a trade war ensues because of your haranguing and hectoring and, yes, fear-mongering (you’re guilty of at least as much hype as the Bush administration with Iraqi WMDs)?…
1) I’m not in favor of the (watered down) protectionist element of the bill either, and there are plenty of things in the bill I would have changed. Less tax cuts and more infrastructure. I understand why the protectionist element is there: without it, there would be the inevitable Republican charge of “why are we borrowing billions of dollars so foreign companies can get contracts?” However, I would have voted for it in a heartbeat, even with the protectionism, because overall it is a pretty good bill. What did every Republican member except three (each of whom come from states where Republican Congressmen are about as rare as Bible shops in a brothel) vote against? Let’s see:
They voted against extending unemployment insurance and health benefits to laid off workers. Better to score political points than lend a helping hand to people who really need it.
They voted against repairing bridges, fixing roads, and building rail lines. I saw a Republican Congressman on CNN yesterday saying the bill was fatally flawed because it includes a light rail line from LA to Las Vegas, or “from Fantasy Land to Sin City.” I guess we are supposed to punish these cities because one makes movies and one has legalized gambling.
They voted against providing money to states in severe financial distress, which are firing teachers, cancelling road projects, and furloughing state workers. Someone else’s problem, I guess.
They voted against green energy projects and fixing the power grid. When a winter storm hit Kentucky a few weeks ago, over a million people were without power, and over a hundred thousand Kentucky residents were without heat or electricity for over a week. What is this, Bengla Desh?
They also voted against their cherished tax cuts, which would actually have done something very quickly to stimulate the economy.
Would I vote for all of these things despite the fact that the bill contains things I don’t like? In a New York minute.
2) I’m not demonizing political opponents, nor am I being alarmist. I don’t think that all Democrats are saints and all Republicans are scoundrels. Far from it. There were plenty of Republican governors — who, unlike Congressmen, actually have to run something — who enthusiastically supported the bill, including our very fine Governor Arnold.
However, as you can tell, I am steaming mad. I don’t think I have ever seen anything in my life as irresponsible as the acts of the Republican members of Congress in the past month. George Bush and his Republican allies were in charge when this mess was created, and their policies enabled the fiscal disaster to take place. These policies were firmly rejected by the electorate last year. Despite that, they have no constructive role to play and have offered no alternatives, being content to play politics and do everything they can to prevent those who actually do have ideas from implementing them. They have shown zero concern for the economy or the massive suffering which their policies have caused, and complete concern for the happiness of their base and their own political well-being. (Or what they perceive to be their political well-being: their political strategy over the past few years hasn’t exactly served them well.)
As for alarmism: the economy has been in decline for well over a year, and in November the decline accelerated dramatically and continues to accelerate. There are times for deliberation. This isn’t one of them. I’m grateful to the Democrats — especially Senator Brown — for getting a bill done in record time. Hopefully it will work: we don’t know. What we do know is that if we continued to follow the pronouncements of the Republicans, things would continue to deteriorate until they reached the point where nothing we could do could fix them.
“George Bush and his Republican allies were in charge when this mess was created, and their policies enabled the fiscal disaster to take place.” Really? That’s all there is to it? George Bush and his Republican allies are entirely responsible? No one else played a role? No other political party?
If they weren’t 100% of the problem, they were over 90% of the problem.
The Bush tax cuts were entirely the result of Republican policies. Bush faced a run of the mill recession shortly after he took office. Because he inherited a budget surplus, it could easily have been handled by the traditional prescription of moderate deficit spending combined with infrastructure and jobs bills. Instead, he used the discredited ideology of “trickle down economics,” and borrowed massive amounts of money to provide tax breaks to middle and upper class families, which depleted the Treasury and did little to create jobs.
After 9/11, he was helped by an extremely accomodative Fed, and the business slowdown which resulted from the attacks could have been ameliorated by the same prescription. Instead, he relied on voodoo economics.
The war in Iraq, which was wrong for so many reasons, also diverted a trillion dollars from the economy and continues to be a drag on the economy.
The government agencies which are responsible for monitoring banks and bank-like institutions were part of the Bush administration, and they failed on a massive scale. OFHEO, which regulated Fannie and Freddie, was out to sleep. The SEC, which approved Hank Paulson’s request to let investment banks take on huge derivative risk, was also asleep. The notion that a regular bank or an investment bank can get levered thirty to one and pose systemic risk without the slightest government oversight is perhaps the greatest single cause of the financial meltdown.
Are there other villains? Of course, but they played a relatively minor role. Things like credit default swaps didn’t exist before 2000, and they were allowed to mushroom to the point where iconic institutions like AIG, Bear Stearns, Citibank, and Bank of America became insolvent and had to be rescued. This was under Bush’s watch, and his administration and its allies are accountable for the mess they created.
So we’re down to 90% responsible. Ok. A careful examination of your villans, and their enablers, reveals a broad, bipartisan group of executive and legislative members. But Bush was President and if the buck does indeed stop at the President’s desk then I would argue that tips the responsibility ratio closer to 60/40, Bush.
Not so. The governmental agencies were 100% part of the Bush administration. The tax cuts were entirely the result of Republican ideology. So were the deficits — under the Clinton administration, deficits turned to surplus. The war in Iraq was initiated and championed by George Bush. The ideology of limited government, letting the “magic of the market” regulate the economy, and lax regulation are entirely Republican concepts. If there is a “broad, bipartisan group” which was responsible, I sure don’t see it.
Peter, blaming the Republicans for the protectionism in this bill is the biggest load of horse sh** you’ve ever tried to peddle. You can’t honestly believe that – if you do, you are about as out of touch as anyone I know.
The DEMOCRATS put the protectionism in the bill – not to appease Republicans (do you have a CLUE as to what appeals to Republicans? It sure ain’t protectionism, except maybe for Pat Buchanan) but to appease the special interest groups that bankroll their party (read: organized labor).
Really, with all due respect, that is just plain insulting, and you won’t succeed in convincing anyone, right or left, of that blatant falsehood…
I think anyone that reads this thread, though, can see that you are viewing the world through highly partisan blinders. I don’t see any point in arguing with you when you get in this mode.
Clearly, the blame for the mess we are in belongs to both parties, a good part of the financial world, and the American consumer, and in just about equal measure. Anyone Republican who blames it on the Democrats or any Democrat who blames it on the Republicans is not interested in truth but demagoguery…
I’ve asked the following question here and elsewhere and nobody ever responds:
If this bill is such an economic and political winner, why this anger at the GOP for not providing totally unneeded votes?
It’s a reasonable question…
Nice that we paid extra for sending an Air Force plane to pick Brown up and send him back. Who thinks a GOPer would have been given the same courtesy?
If Kennedy can’t do his job, he should resign. He’s not a king who is not able to abdicate because the kingdom would be in chaos. He’s just another corrupt politician way past his expiration date.
Perhaps I was unclear. I do blame the Democrats for putting protectionism (although it’s really protectionism lite) into the bill, partly to appease their own constituencies such as labor, but also to innoculate themselves against the inevitable Republican complaints about foreign companies getting contracts from the stimulus bill.
However, rhetoric aside, the Republicans are no more committed to free trade than the Democrats are. For many years, under both Republican and Democratic administrations, we have protected domestic industries such as agriculture, sugar, tobacco, big pharma, textiles, rice, lumber, and countless others. We use tariffs, import quotas, export subsidies, and countless other devices to restrict global trade. We restrict the free trade of human capital by restricting immigration to protect American workers from agricultural workers from Mexico and software developers from India. This is because these interests not only control a lot of votes — end agricultural subsidies and you lose the Midwest and much of the South — but because they are represented by powerful lobbies which donate heavily to support their interests.
If free trade was so important to Republicans, then when they controlled the White House and Congress for six years they would have done something about our protectionist policies. I don’t blame them for doing nothing — Democrats would also have done nothing — but it would be inevitable that Republicans would fan protectionist flames if there was a stimulus bill without a protectionist element. Not that Democrats would not have done the same thing. What I wrote was shorthand for these three paragraphs, and I apologize if this wasn’t clear.
As for the blame game, I stand by my words. Of course consumers and businessmen were also to blame, but human nature is what it is, and subprime borrowers will always take out shaky loans if a bank will lend them the money, and businesses will always put themselves at risk when they see their competitors making a quick profit and their quarterly results are lower because they play it more conservatively. That is why government regulation is essential to insure that banks have transparent balance sheets, maintain adequate capital ratios, and in general operate responsibly. The failure to maintain and enforce regulations during the Bush years is almost exclusively the fault of the Bush administration. It’s a simple matter of demonstrable fact.
Hogwash…the easy credit that led to the subprime catastrophe began under the Clinton administration. That’s not opinion, it’s empirical fact. And if you think the Democrats are as committed to free trade as the Republicans, you’re still living in the Clinton era. In this era, Democrats have replaced ‘free trade’ with ‘fair trade’, and Obama campaigned on it, including unilateral ‘modifications’ to NAFTA. Where you get the idea that Republicans are against foreign companies getting contracts from government spending is beyond me. I’ve never in my life heard such a complaint from any Republican who wasn’t an acolyte of Pat Buchanan, yet you describe these complaints as ‘inevitable’. Give me one example from a prominent Republican in power – one single solitary example. I’m betting a large sum you can’t do it…
From a recent feature on TIME’s online site:
Please understand that I am not blaming Clinton exclusively or even mainly for the crisis, I’m just countering your “It’s all the fault of Bush and the Republicans” nonsense…
1) There were certainly subprime mortgages under Clinton. However, they were a relatively insignificant part of the mortgage market until years later. Go to the Federal Reserve report at http://www.federalreserve.gov/pubs/feds/2008/200829/200829pap.pdf and then go to Figure 1A (Subprime Origination By Year) and Figure 1B (Subprime Mortgages as a Percent of Total Originations). The data only go back to 1998, but subprime mortgages were roughly 3% of total originations in 1998, and over 15% in each of the three years of 2004 through 2006. When 3% of a bank’s mortgages go to risky customers, it’s a manageable risk; when they go to nearly a fifth of a bank’s mortgages, then you’ve got a problem.
2) Subprime mortgages are not intrinsically wrong, but when they are combined with terms like no money down, no verification, and teaser introductory rates which multiply in a few years, you’ve created a situation which will inevitably lead to instability when real estate prices or the economy goes in the tank. These are all things which can be easily regulated, and they really didn’t exist to any amount to speak of until several years after Bush got to office. Saying “subprime mortgages” to a non-academic is shorthand for the low loan quality because of the combination of a subprime borrower and terms which made foreclosures an inevitability. Failing to use regulation to enforce responsible lending practices is something which the Bush administration should be held accountable for.
3) The real problem wasn’t the subprime mortgages themselves — the economy would have absorbed the hit from a lot of foreclosures — but their securitization into Mortgage Backed Securities and Credit Default Swaps, which in turn got turned into derivatives and their risk went up exponentially. Hence they became what Warren Buffett termed at the time “financial weapons of mass destruction.” A separate but related problem is that companies from AIG, Citibank, and Lehman Brothers owned them at leverages of up to 30 to 1 and hedged their positions against what should have been a countervailing derivative. However, when the black swan event occured and the supposedly hedged positions didn’t square each other out — but instead both became losing positions — you had companies with billions of dollars in other tangible assets suddenly go insolvent. These markets didn’t exist under the Clinton administration. My point is simply that the Bush administration should be held accountable for allowing these financial WMD to proliferate without any regulatory supervision.
Re the second question in the 6:15 post (what happened to the numbers?): reread the second paragraph of the 3:45 post (“rhetoric aside …”).
It is true that unless the Republican is of the Buchanan/Tancredo/Huckabee part of the party, you will not hear protectionist rhetoric. It is also true that there are true blue free traders, such as John McCain. My point is simply that lack of protectionist rhetoric does not mean that Republicans aren’t as guilty as Democrats in protecting domestic political interests.
The Bush administration did nothing to advance the cause of free trade, and it allowed protectionism when its political interests were threatened. A good example of this is the 2002 farm bill, which Bush did not veto because he did not want to jeopardize Republican Congressmen running for election in farm states. This is not to say that Democrats aren’t equally culpable — it is merely to point out that rhetoric isn’t nearly as good a metric as action (and inaction) for evaluating if a politician is for or against free trade.
Well, at least be honest with yourself and admit that the Democrats put the protectionism in the bill to please their labor constituency, and not some mythical Republican complaining about foreign companies getting our money, since you were unable to supply the single example I asked for…that has to be the most creative excuse for Democratic pandering I have ever heard, but unfortunately it has no basis whatsoever in reality…
And you are flat wrong that credit default swaps didn’t exist in Clinton’s era – in fact, HE SIGNED LEGISLATION EXEMPTING THEM FROM REGULATION.
Read up on the Commodity Futures Modernization Act.
From Wikipedia:
You also completely ignore, as usual, the abundant evidence of the pressure put on Fannie Mae and Freddie Mac and other housing lenders to loosen their lending standards by Clinton, his officials, and such Democratic bigwigs as Barney Frank, primarily through changes to the Community Reinvestment Act that resulted in looser lending standards industry-wide…everyone who wanted a house could suddenly get one, all right, but not all of those people had any business owning a house under their financial circumstances…
Umh, if Commodity Futures Modernization Act (which legalized CDSs) was signed into law on Dec 21, 2000, and George W Bush was inaugurated a month later, it is fair to say, “the Credit Default Swap Market did not exist under the Clinton Administration.”
That Phil Gramm, the genius behind the CFMA (among other deregulatory attrocities), is not now Treasury Secretary is one more thing for which we can thank our lucky stars.
1) See the 3:45 post regarding labor. The Democrats do kowtow to labor: no argument there. As for future Republican complaints: we’ll have to see.
2) You left out the parts of the Wikipedia piece which report that it passed a month before Clinton left office, stating that “In substance, it appears that the leadership of the Republican-controlled Senate and House incorporated the deregulation of credit default swaps into an omnibus budget bill (without hearings or recorded votes)at a time when the outgoing president was in no position to veto anything.” You’re blaming Clinton because he didn’t veto an obscure part of an 11,000 page omnibus budget bill which was rushed through by the Republican leadership in Congress?
3) It is true that Barney Frank promoted greater home ownership by low income people, just as Bush did as part of the Ownership Society program. However, the regulatory body which is charged with monitoring the GSE’s is OFHEO, whose role is to restrain politicians who want to promote housing and bankers looking to make a lot of loans. It like blaming a baseball coach because the umpire looks the other way when his pitcher throws a spitball.
No, if Credit Default Swaps did not exist, there would have been no need to exempt them from regulation. Are you telling me Clinton signed legislation dealing with a non-existent product?…In fact, they were devised by a team from JP Morgan in 1997…
Peter, Clinton signed the bill, that’s the point – Bush was not even in office, so you can hardly blame him…
Peter, I notice you keep referring to comment timestamps…it’s too bad this new template doesn’t number the comments like the old one, isn’t it? Maybe I’ll find out how to make that change at some point…
Mark, you are shucking and jiving here. The bill passed a month before Clinton left office, stuck into an 11,000 omnibus spending bill without debate or public notice, by the Republican leadership in Congress. Are you suggesting that a lame duck President should have brought the government to a halt and vetoed a bill which needed to pass because of an obscure element within it which stuck there by the other party? Moreover, the fact that the omnibus bill was signed by Clinton is hardly relevant, as they didn’t exist until months later, so you are also suggesting that he should be held responsible for regulating them when they came into existence months later, when he was out of office, and should have been regulated by a Treasury Secretary who was appointed by his successor?
Well, I like the time stamps because it was originally my suggestion, so I have a pride of authorship there. Sorry for the crappy syntax and missing words in the previous post, I’m also supervising my daughter and three other kids. Correction: I should be supervising my daughter and three other kids.
And if you, Peter, citing Wikipedia, are going to blame the Republican-led Congress for the legislation that Clinton signed, then you, in the interest of fairness, have to blame the financial meltdown on the Democratic Congress that was in power during the waning years of the Bush Administration…and if your argument is that it wasn’t the legislators, but the regulatory officials, you need to read up on how Rubin, Summers, Levitt, and Greenspan, Clinton administration officials at Treasury, the SEC, and the Fed, hounded out the head of the CFTC for daring to try to regulate exotic financial instruments in Clinton’s second term. Here’s a good place to start:
So your venom at the Bush administration for its lax regulation is strangely misplaced…
And again, Peter, credit default swaps were devised in 1997…
In fact, credit default swaps were a $900 billion market BEFORE the 2000 Act signed by President Clinton, prior to Bush’s inauguration and thus totally out of his control…
In fact, here’s an article from Business Week in 1997 describing the new instrument of credit default swaps being employed by JP Morgan…so can we agree to face reality and quit insisting they only came into being after Bush took office so that you can blame him for not regulating them?…
The swaps themselves existed, prior to 2000.
But there was no secondary market for CDSs, in which neither the buyer, nor the seller, owned the underlying asset. That was a post-2000 development which, as I understand it, was enabled by the CFMA.
Prior to the CFMA, CDSs were contracts between a small number of “known” players. After 2000, the CDS market became a vehicle for speculative side-bets on the financial health of just about anyone. In so doing, the CDS market mushroomed from $900 billion to $45 trillion (that is, to several times the total GDP of all the countries in the world, combined).
All that, thanks to Phil Gramm, and his henchmen.
Ack. Sorry.
World GDP in 2007 was $54 trillion, just a little more than the $45 trillion in outstanding CDs contracts in 2007.
Yes, thanks in part to Phil Gramm, but as the NY Times article cited above shows, the Clinton Administration was very sympathetic to a very loose regulation of derivatives…in any event, you can hardly blame Bush for something that happened prior to his inauguration…
In fact, I would go so far as to say this: if the current crisis has shown us ANYTHING, it is that government, under both Democrats and Republicans, is far too cozy with Wall Street. And it’s not ending under Obama, as evidenced by the $2.5 trillion bank bailout currently under discussion (on top of the $700 billion of TARP funds and the $1 trillion already made available by the Fed)…
I agree.
But if I had to pick just one person most responsible for the mess we are in, it would have to be Phil “nation of whiners” Gramm.
Well, when TIME asked its readers to vote on the 25 people most at blame for the current crisis, you’ll be glad to know that Gramm came in at #1…
Still no answer to my question.
BTW, I did not realize that Phil Gramm could pass a bill all by himself with no other votes. He apparently served in the House simultaneously and was President also. A truly amazing man.
According to the Congressional Research Service of the The Library of Congress:
Gramm is even more amazing. He and his “henchmen” managed to infiltrate all those federal agencies filled with democrats. Must have been mind control.