Don’t You Point Your Finger At Bubba

Well, well, well. Time Magazine names Bill Clinton one of the 25 people to blame for the current economic crisis, along with Alan Greenspan and George W. Bush. While Democrats harped at Bush’s “failed economic policies”–recall Nancy Pelosi’s grating bailout speech?–Dubya was faulted mainly for his lack of leadership when the crisis precipitated towards the end of his term (“Why did the financial collapse have to happen on my watch?”). By that time, he had been dismissed as a lame-duck president anyway. The roots, however, ran far deeper into the past, during Clinton’s tour-of-duty, when the major legislations that deregulated the financial market were signed into law.

President Clinton’s tenure was characterized by economic prosperity and financial deregulation, which in many ways set the stage for the excesses of recent years. Among his biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment.

(from Time, 17 Feb 2009)

Clinton promptly responded with a vehement denial: “Oh no. My question to them is: Do any of them seriously believe if I had been president, and my economic team had been in place the last eight years, that this would be happening today? I think they know the answer to that: No.” (from Yahoo! News, 16 Feb 2009)

 

They Had It Coming

Just found this on the Web: Representative John D. Dingell’s (D, 15th District, Michigan) speeches on the Conference Report on S. 900 or the Gramm-Leach-Bliley Act that deregulated the banking industry in 1999.

From Congressional Record, House, 4 Nov 1999, p. H11542

Madam Speaker and my colleagues, I think we ought to look at what we are doing here tonight. We are passing a bill which is going to have very little consideration, written in the dark of night, without any real awareness on the part of most of what it contains.

I just want to remind my colleagues about what happened the last time the Committee on Banking brought a bill on the floor which deregulated the savings and loans. It wound up imposing upon the taxpayers of this Nation about a $500 billion liability. That is what it cost to clean up that mess.

Now, at the same time, the banks by engaging in questionable practices wound up in a situation where the Fed and the Treasury Department had to bail them out also at the taxpayers’ expense. But it did not show.

Having said that, what we are creating now is a group of institutions which are too big to fail. Not only are they going to be big banks, but they are going to be big everything, because they are going to be in securities and insurance, in issuance of stocks and bonds and underwriting, and they are also going to be in banks. And under this legislation, the whole of the regulatory structure is so obfuscated and so confused that liability in one area is going to fall over into liability in the next. Taxpayers are going to be called upon to cure the failures we are creating tonight, and it is going to cost a lot of money, and it is coming. Just be prepared for those events.

You are going to find that they are too big to fail, so the Fed is going to be in and other Federal agencies are going to be in to bail them out. Just expect that.

 

Nag, Nag, Nag

Here’s the YouTube video of Nancy Pelosi ranting in Congress before putting to vote the unpopular $700B bailout of Wall Street. Instead of rallying both parties who must vote against the tide of opinion from their constituencies, and risking their political future in November, she squanders the political capital gained in the frantic bi-partisan effort in putting together the bill by delivering this incendiary and divisive speech.

$700 billion. A staggering number. But only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness. When President Bush took office, he inherited President Clinton’s surpluses—four years in a row, budget surpluses, on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned that around.

And now eight years later, the foundation of that fiscal irresponsibility, combined with an anything goes economic policy, has taken us to where we are today. They claim to be free market advocates, when it’s really an anything goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute, and the taxpayer will bail you out.

Those days are over. The party is over in that respect. Democrats believe in a free market. We know that it can create jobs, it can create wealth, it can create many good things in our economy. But in this case, in its unbridled form, as encouraged, supported, by the Republicans—some in the Republican Party, not all—it has created not jobs, not capital, it has created chaos. (from Transcript of Speaker Pelosi’s Speech, The NY Times, 29 Sep 2008)

 

Wall Street Kabbalah

Power Sellers

And seven was supposed to be a lucky number. Today the US House of Representatives junked the $700B bailout bill that will foot the losses of Wall Street high-rollers with taxpayer money. The markets responded by plummeting 777 points (or 7%) in the Dow Jones Industrial, lower than the first trading day after 9/11, and in the history of the stock market. I must admit feeling a sense of déjà vu this past couple of weeks: it was like watching the WTC towers collapse live all over again, but in slow motion, as financial behemoths–some predating the Civil War–folded, one after another. After Lehman Brothers filed for bankruptcy and Merrill Lynch sold to Bank of America, I started following the story of the US financial market meltdown, and had gotten addicted to morning Cuban coffee and The NY Times.

It is certainly interesting times here in the US, and fascinating to witness how this democratic society grapple with the excesses of capitalism while avoiding the pitfalls of socialism. There is now more than ever heated public discourse on the role of government in private enterprises–from the failure to regulate inventive financial products such as derivatives, to the increasing suspicion of Washington’s bailout plan in the public opinion. Bill Perkins, a venture capitalist from Houston, put out full-page ads in The NY Times featuring cartoons of how Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, together with President Bush is leading the country to the path of socialism with the plan to buy outright the toxic assets of banks related to distressed mortgages.

The ad features a hand-drawn cartoon of President Bush, Secretary of the Treasury Henry Paulson and Federal Reserve Chariman Ben Bernanke raising a flag in the famous World War II Iwo Jima pose. The flag, however, has a communist sickle symbol and the words “big insurance,” “Detroit Auto” and “Wall St. Banks.” There are tombstones behind the men with the words “private enterprise” and “capital.” A plaque above it all says “The New Communist.” The cartoon was drawn by a Houston-based artist named Dawolu Jabari Anderson. (from Bill Perkins, Bailout Critic, “New Communists” New York Times Ad, Ground Report, 23 Sep 2008)

 

A Dose of Sobriety from Barbara Ehrenreich

Back when I was teaching General Chemistry to beginning science students, naively assuming everyone taking the course would simply continue on with careers in the hard sciences, I would read in class Barbara Ehrenreich’s little essay (Science, Lies and The Ultimate Truth, Time, 20 May 1991) on the case of data fraud perpetrated by the post-doc of Nobel scientist David Baltimore. I wanted my students to learn more than just how to explain observable phenomena in terms of the operations of atoms and molecules. Ehrenreich’s essay provided a sobering perspective on the scandal, and, more than that, a meditation on how the enterprise of science itself calls forth a certain ethos of truth-telling.

But science is different, and the difference does define a kind of sanctity. Although we think of it as the most secular of human enterprises, there is a little-known spiritual side to science, with its own stern ethical implications. Through research, we seek to know that ultimate Other, which could be called Nature if the term didn’t sound so tame and beaten, or God if the word weren’t loaded with so much human hope and superstition. Think of it more neutrally as the nameless Subject of so much that happens, like the It in “It is raining”: something “out there” and vastly different from ourselves, but not so alien that we cannot hope to know Its ways…

But falsifying data lay outside our moral universe. The least you could do as a scientist was record exactly what you observed (in ink, in notebooks that never left the lab). The most you could do was arrange the experimental circumstances so as to entrap the elusive It and squeeze out some small confession: This is how the enzyme works, or the protein folds, or the gene makes known its message. But always, and no matter what, you let It do the talking. And when It spoke, which wasn’t often, your reward, as one of my professors used to say, was “to wake up screaming in the night” — at the cunning of Its logic and the elegance of Its design.

At the end of the essay, Ehrenreich, like some mystic sage sitting under a tree, dispenses a humbling admonition to Baltimore: