Economy

Bill Clinton ruined the economy? Ummm, no…

by Marti J. Smith

The latest BS I’m hearing is that the failed economy was originally created by Bill Clinton. That’s not what happened.

Clinton wanted to be sure that the middle-class and newbies entering the housing market would get a fair shake. But at the tail-end of his term in office the Republican Congress managed to slip some veto-proof “extras” into a bill, and the result perverted Clinton’s goals and helped spark the series of events that created the mess in which we now find ourselves. I got tired of hearing this rhetoric blaming Clinton’s administration. I’ve been asked by several people I know to explain what happened, so I decided to prepare a real response. Read on…

Two long standing pieces of legislation were “improved” by various pieces of legislation. There were revisions to the Community Reinvestment Act (CRA) during the 1990’s (even more in 2005), The Gramm-Leach-Bliley Act of 1999 which undid much of the Glass-Steagall Act, then the real pièce de résistance was the Commodity Futures Modernization Act of 2000.

When you look at all of this, you can’t help but see a common denominator. In this case, the CD is Phil Gramm.

Check out this article to see how all of the above contributed to where we are today.

For a bit of irony here is what Gramm said on the day of the signing of the GLBA, aka,the Financial Services Modernization Act:

Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, made the following statement today in a ceremony at the Eisenhower Executive Office Building, where President Clinton signed the Gramm-Leach-Bliley Act into law:

“The world changes, and Congress and the laws have to change with it.

“Abraham Lincoln used to like to use the analogy that old and outmoded laws need to be changed because it made about as much sense to continue to impose them on people as it did to ask a man to wear the same clothes he did when he was a child.

“In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.

“We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom.

“I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality.”

The Commodity Futures Modernization Act of 2000 was the piece that blew all of this a part because it allowed for the type of commodity speculation (gambling) that brought everything crashing down. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in the 262-page measure. Written with the help of financial industry lobbyists and co-sponsored by Senator Richard Lugar (R-Ind), the chairman of the Agriculture Committee, the measure had been considered dead – even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. There was a vote and the bill passed right before Christmas.

How many time do we have to learn that we have to regulate to keep us all honest? The darkest parts of human nature make the temptation to financially benefit at whatever cost too irresistible.

All too often, this becomes a politicized discussion. The Republicans like to blame Clinton for the CRA revisions (“let’s blame the poor people for buying houses they can’t afford”) but conveniently forget to mention that Congress was in the control of their party (January 1995-January 2007) at the time and paved the way for all of this to come to pass. Truth is, both parties can find accountability.

Now, we have to fix things.

17 replies »

  1. And bullshit like this is why I despise, hate, loath, and would gleefully defile every omnibus spending bill that has ever happened. It’s FAR too easy to slip in everything including the kitchen sink with no oversight whatsoever.

    It’s far too much to hope that Congress will ever take its budgetary duties seriously and star passing funding bills without tacking on pork and unrelated provisions.

  2. It’s nonsense like this that makes me want an amendment to the US constitution:

    Congress can not pass any bill longer than 25 pages, 8.5 x 11 sheets, single sided, 1.5 spacing, 10 pt font.

    If it takes more pages then that to write a piece of legislation, break it up.

  3. At this point I’d be happy with a rules change that prevented the inclusion of unrelated provisions in bills, that prevented bills from having votes scheduled without allotting a certain amount of time per page to read the damn things (24 hours minimum – no more 11:59PM introductions and 12:01AM votes), and that required every Congresscritter actually read every page of every bill.

    I think 24 hours (NOT one day) minimum and one hour reading time per page might be a good starting point.

  4. You’re right. Bill Clinton wasn’t the original person responsible for the current economic debacle; Jimmy Carter and the 95th U.S. Congress were. (see: http://en.wikipedia.org/wiki/Community_Reinvestment_Act & http://en.wikipedia.org/wiki/95th_U.S._Congress).

    Greed certainly played a part in the sub-prime/derivatives mess, yet the delusional thinking and opportunistic behavior of individuals such as Henry G. Cisneros contributed greatly to the meltdown (see: “Building flawed American dreams,” NYT, 10/18/2008).

    Ultimately we have relied on others to ‘run’ our economy when we should have relied upon ourselves.

  5. Plenty of blame to go around, but most of it ends up back in Gramm’s lap in one way or another. The more fundamental issue might be the shift in our economy from one that produces tangible things to one that relies on financial services…especially as it seems to be a harbinger of national decline, historically.

    And yeah, politicians need to realize that they’re public servants first and foremost…but that probably won’t happen until we start treating them like servants or find a way to remove money from the equation.

  6. How much would it take out of a senator’s paycheck to hire a team of people to read the bills put before the senate and summarize their basic points and implications?

    Do these sorts of teams exist already?

  7. Supposedly their staffs do this already, Steve, but all the people in the world won’t do you any good if you’ve got a 500 page document and 2 hours in which to read and understand the entire thing. And each Congresscritter needs his or her own staff, since each has his or her own specific interests.

  8. Well, every action does have an equal and opposite reaction. Sure, creating or expanding the required window between legislation proposal and its vote would be the rational, sane thing to do, but consider the hit the energy drink industry would take.

    I was also under the uneducated opinion that congressional staffs did things more in line with handling appointments, receiving telephone calls and reading [e]mail, and covering procedures for fundraising and the like. My naturally cynical side assumed no one read the legislation.

  9. I have a friend of a friend who works/worked for some Republican as a staffer, and I heard that summarizing legislation is one of the many things staffers can be called upon to do. I imagine that’s for senior staffers, while fetching energy drinks, brewing espresso with caffeinated water, and answering phones is for the junior staffers.

    However, that’s second-hand info, so take it as you will.

  10. It will never cease to amaze me just how many times we have to ‘learn’ that ‘government IS the answer’ in terms of controlling those who would chose to abuse others for personal gain.

    Laws.. We have laws to keep bad people from doing things decent people would never do. Businesses are no different in that regard, mostly because they are run by people. If government is the sole authority, dictated by the Constitution, to pass laws over people, then that same government has the authority (and obligation) to pass regulations.

  11. Bollocks.

    This webpage has not one mention of Robert Rubin, nor does the CBS article linked above. Quite an outstanding omission given the breadth of the claims made.

    “Another potential [Obama] pick for the [new Treasury Secretary] post is Robert Rubin, who served under Clinton in the same position and is currently Director and Senior Counselor of Citigroup. Rubin played a key role in abetting another neoliberal objective: deregulation. Where Volker was hung up on economic austerity, Rubin pushed for more deregulatory policies that ended up shifting jobs, and entire industries, overseas.

    Rubin even pushed for Clinton’s dismantling of Glass-Steagall, testifying that deregulating the banking industry would be good for capital gains, as well as Main Street. “[The] banking industry is fundamentally different from what it was two decades ago, let alone in 1933,” Rubin testified before the House Committee on Banking and Financial Services in May of 1995.

    “[Glass-Steagall could] conceivably impede safety and soundness by limiting revenue diversification,” Rubin argued.

    While the industry saw much deregulation over the years preceding these events, the Gramm-Leach-Biley Act of 1999, which eliminated Glass-Steagall, extended and ratified changes that had been enacted with previous legislation. Ultimately, the repeal of the New Deal era protection allowed commercial lenders like Rubin’s Citigroup to underwrite and trade instruments like mortgage backed securities along with collateralized debt and established structured investment vehicles (SIVs), which purchased these securities. In short, as the lines were blurred among investment banks, commercial banks and insurance companies, when one industry fell, others could too.

    Robert Rubin is in part responsible for supporting the policies that pushed us to the brink of a great recession. When the subprime mortgage crisis hit, instability and collapse spread across numerous industries.”

    –A Look Under the Hood of an Obama Administration
    By JOSHUA FRANK
    http://www.counterpunch.org/frank11062008.html

    “The second major component of Clinton administration policy in this area was supporting the successful repeal of the Depression-era Glass-Steagall framework of financial regulation through the 1999 Financial Services Modernization Act, otherwise known as Gramm-Leach-Bliley Dismantlement of Glass-Steagall, de facto and de jure, had been long in the making. Innovative financial market players were easily circumventing this old regulatory apparatus, with its focus on creating firewalls between segments of the financial services industry, and preventing commercial banks from operating in more than one state. But the point is that an alternative to both Glass-Steagall and complete deregulation could have been devised, through some combination of policies such as taxing speculative financial transactions and establishing lower reserve requirements for loans that finance productive, as against speculative, investments. But the Clinton administration never considered such an approach. Quite the contrary. The 2001 Economic Report of the President, the last one written under Clinton, was unequivocal in dismissing Glass-Steagall and touting the virtues of financial deregulation:

    “‘Given the massive financial instability of the 1930s, narrowing the range of banks’ activities was arguably important for that day and age. But those rules are not needed today, and the easing of interstate banking rules, along with the passage of the Financial Services Modernization Act of 1999 have removed them, while maintaining appropriate safeguards. These steps allow consolidation in the financial sector that will result in efficiency gains and provide new services for consumers.’

    “Moreover, Robert Rubin, a major Clinton administration force behind Glass-Steagall repeal, was also among the first to benefit personally from it, in moving from his Treasury position to co-direct the newly merged investment/commercial banking conglomerate Citigroup. Under any reasonable interpretation of Glass-Steagall, the former commercial bank Citicorp and the former investment banking firm Travelers would not have been permitted to merge.”
    –Is This the Stake Through Neoliberalism’s Heart?
    http://www.counterpunch.org/cockburn09202008.html

  12. A line item veto would allow all the addons to be taken out by the president. Legislators shouldn’t be allowed to add on pet projects to bills. If they do, the president should be allowed to say NO!

    If bills only included what you’re voting on, then all the back room dealing would go away.

  13. Do you not remember the free trade agreement? Perot was right, many of our companies ran to Mexico for cheap labor. American simply can not compete with third world countries when it comes to labor costs, SO….Bill Clinton DID help put us in the shape we are in now and it is because of the free trade agreement. Sometimes the TRUTH hurts and it does not matter if you are a Dem or repub, a bad idea is a bad idea!

  14. So is the problem the free trade agreement that Clinton signed, or the companies that bought politicians in order to enable the companies to move production overseas and increase their profits (and lower their taxes) accordingly?

    Personally I blame the politicians, yes, but I blame the corporations and CEOs far more.

  15. So, HOW IS IUT NOT CLINTONS FAULT?????? He is the LEADER, do you understand what that is…oh, you are a democrat, so you live by sliding blame to others. I DO NOT. I live by being accountable. Clinton did not have to sign the bill, he did not have to repeal Glass-Steagall. He caused this, and you are just trying to push the fault off the leader, and that is not how the world works in 99% of Americans eyes. See, the 99% are not like you. They do not slide the blame to someone else. they do not take credit for things they did not do. You democrats will say, do, and lie your way to get what you want. It is truly sad. How do you live like that?? Shove you CD up your you know what, deregulating in 1999 by Clinton caused the financial crisis. Plain and simple. Spin it how you want, people aren’t that stupid

  16. Clinton not only signed the bill that murdered Glass-Steagall, he still defends it. I heard him with my own ears. Your conclusions are wrong, derived from twisted logic.

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