Robert Scheer names names: ALAN GREENSPAN, uber-Right-Wing Republicans PHIL GRAMM and JIM LEACH (both co-authors of the the "Gramm-LEACH-Bliley Act of 1999") and ROBERT RUBIN and LAWRENCE SUMMERS, are THE FIVE MEN _MOST RESPONSIBLE_ for the Current Economic Crisis.
We here at DemNationUSA are HUGE fans of Robert Parry, Thom Hartmann, and Paul Krugman, as well as of Robert Scheer, and we are DELIGHTED to read Scheer's current op-ed, which expresses better than we have been able to our frustration with the reflexive "liberal" position to BLAME REAGAN.
As Scheer so insightfully points out, it is President Obama's "Democrat" team - along with two or three Republicans - who are DIRECTLY RESPONSIBLE for THIS Economic Crisis, FAR MORE than Ronald Reagan, who really, truly WAS "out of the loop" of most of the Iran-Contra scandal (which PRIVATE, SECRET, ILLEGAL wars of slow-burn genocide and death-squad dictatorships were BEING RUN BY FORMER CIA DIRECTOR, TEXAS OIL MAN, and then Vice President GEORGE H.W. Bush (Sr.)
Reagan Didn't Do It June 3, 2009
How could Paul Krugman, winner of the Nobel Prize in economics and author of generally excellent columns in the New York Times, get it so wrong? His column last Sunday--"Reagan Did It"--which stated that "the prime villains behind the mess we're in were Reagan and his circle of advisers," is perverse in shifting blame from the obvious villains closer at hand.
It is disingenuous to ignore the fact that the derivatives scams at the heart of the economic meltdown DID NOT EXIST in President Reagan's time. The huge expansion in collateralized mortgage and other debt, the bubble that burst, was the direct result of enabling deregulatory legislation pushed through during the Clinton years.
Ronald Reagan's signing off on legislation easing mortgage requirements back in 1982 pales in comparison to the damage wrought fifteen years later by a cabal of powerful Democrats and Republicans who enabled the wave of newfangled financial gimmicks that resulted in the economic collapse. Reagan didn't do it, but Clinton-era Treasury Secretaries Robert Rubin and Lawrence Summers, now a top economic adviser in the Obama White House, did. They, along with then-Fed Chairman Alan Greenspan and Republican congressional leaders James Leach and Phil Gramm, blocked any effective regulation of the over-the-counter derivatives that turned into the toxic assets now being paid for with tax dollars.
Reagan signed legislation making it easier for people to obtain mortgages with lower down payments, but as long as the banks that made those loans expected to have to carry them for thirty years they did the due diligence needed to qualify creditworthy applicants. The problem occurred only when that mortgage debt could be aggregated and sold as securities to others in an unregulated market.
The growth in that unregulated OTC market alarmed Brooksley Born, the Clinton-appointed head of the Commodity Futures Trading Commission, and she dared propose that her agency regulate that market. The destruction of the government career of the heroic and prescient Born was accomplished when the wrath of the old boys club descended upon her. All five of the above mentioned men sprang into action, condemning Born's proposals as threatening the "legal certainty" of the OTC market and the world's financial stability.
They won the day with the passage of the Commodity Futures Modernization Act, which put the OTC derivatives beyond the reach of any government agency or existing law. It was a license to steal, and that is just what occurred. Between 1998 and 2008, the notational value of the OTC derivatives market grew from $72 trillion to a whopping $684 trillion. That is the iceberg that our ship of state has encountered, and it began to form on Bill Clinton's watch, not Reagan's.
How can Krugman ignore the wreckage wrought during the Clinton years by the gang of five? Rubin, who convinced President Clinton to end the New Deal restrictions on the merger of financial entities, went on to help run the too-big-to-fail Citigroup into the ground. Gramm became a top officer at the nefarious UBS bank. Greenspan's epitaph should be his statement to Congress in July 1998 that "regulation of derivatives transactions that are privately negotiated by professionals is unnecessary." That same week Summers assured banking lobbyists that the Clinton administration was committed to preventing government regulation of swaps and other derivatives trading.
Then-Rep. Leach, as chairman of the powerful House Banking Committee, codified that concern in legislation to prevent the Commodity Futures Trading Commission or anyone else from regulating the OTC derivatives, and American Banker magazine reported that the legislation "sponsored by Chairman Jim Leach is most popular with the financial services industry because it would provide so-called legal certainty for swaps transactions. ... "
Legal certainty for swaps--meaning the insurance policies of the sort that AIG sold for collateralized debt obligations without looking too carefully into what was being insured and, more important, without putting aside reserves to back up the policies in the case of defaults--is what caused the once respectable company to eventually be taken over by the US government at a cost of $185 billion to taxpayers.
Leach, an author of the Gramm-Leach-Bliley Act, which allowed banks like Citigroup to become too big to fail, is now a member of the board of directors of ProPublica, which bills itself as "a non-profit newsroom producing journalism in the public interest." Leach serves as the chair of a prize jury that ProPublica has created to honor "outstanding investigative work by governmental groups," and perhaps he will grant one retrospectively to Brooksley Born and the federal commission she ran so brilliantly before Leach and his buddies destroyed her.
About Robert Scheer
Robert Scheer, a contributing editor to The Nation, is editor of Truthdig.com and author of The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America (Twelve) and Playing President (Akashic Books). He is author, with Christopher Scheer and Lakshmi Chaudhry, of The Five Biggest Lies Bush Told Us About Iraq (Akashic Books and Seven Stories Press.) His weekly column, distributed by Creators Syndicate, appears in the San Francisco Chronicle. more...