According to Paul Krugman, when it comes time to walk back the cat on who set in motion the destructive forces that brought about the Great Recession (provided it doesn't get a lot worse), the trail leads back to Ronald Reagan.
I do not doubt that there is some truth to this. Anyone who has paid attention to the rantings of the GOP over the years knows full well that it is an article of faith that everything that was put in place by FDR has to be rolled back. The GOP and their spineless and gutless allies in the Democratic Party were able to roll back almost all of the financial regulations and what it brought us was the drawn out collapse of the banking system. Only the existence of the FDIC prevented large-scale bank runs and a wholesale collapse.
The Party of Hoover got its wish, at least when it came to financial institutions. And the result was almost the same as it was the last time the banks were largely unregulated. But the Hooverites cannot buy a clue, because this is a matter of their True Faith.
If our economy is going to avoid a third trip down this road, we need to bring back competent adult supervision of those greedy fucks in the financial industry.
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2 comments:
You obviously haven't seen
Why We Fight
The Op-Ed piece is altering history slightly. While the banks were "de-regulated" it had almost nothing to do with the recent housing crisis. In 1999, Fannie Mae came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas designated in the Community Rebuilding Act of 1977. Due to the increased ratio requirements, institutions in the primary mortgage market pressed Fannie Mae to ease credit requirements on the mortgages it was willing to purchase, enabling them to make loans to subprime borrowers at interest rates higher than conventional loans. Shareholders also pressured Fannie Mae to maintain its record profits.
So what happened in the mid to late 1990s? the 20% downpayment rule was relaxed, credit requirements were loosened, borrowers started borrowing 100% of the home value (sometimes more). This created more buyers and thus a sellers market, driving up home prices. Home prices go up and those that financed 100% of their home started seeing large gains from their investment as their homes doubled in value in a short time. It's a vicious cycle that came to a crashing end not long ago.
I'd take a look at http://www.forbes.com/2009/02/13/housing-bubble-subprime-opinions-contributors_0216_peter_wallison_edward_pinto.html for an alternate view. Seems to me that without a government mandated "affordable housing goals", the unregulated banks probably wouldn't have provided loans to those who probably shouldn't have afforded one.
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