Did Clinton cause the banking crisis?

[dmc444]

On Wall Street and Main Street they call William Jefferson Clinton the "Comeback Kid," but it's not because of some Election Day surprise.

It's because almost everything he did regarding financial-services regulation has come back to haunt us.

If it wasn't apparent before, the former president's handiwork became clear when President Barack Obama announced his plans for sweeping financial-services reforms. Obama's efforts to bring fair dealing to the mortgage markets, rules to the derivatives marketplace and restraint to big financial companies underscore the missteps of Clinton's second term.

We had weakly regulated markets when Clinton took office, but by the time he left, they were an invitation to lawless dealing. For the ease of it, Willie Sutton would have traded his gun and mask for a briefcase and necktie.

Clinton created a fertile environment for home-lending charlatans and hiding places for Wall Street swindlers, and upset a regulatory structure that had served the financial marketplace so well for more than six decades.

Full Article here Did Clinton cause the banking crisis? - MSN Money

[cd27]

He also abolished the Act that separated commercial and investment banking. Robert Rubin was it?

[Wendy]

Good intentions, wasn't it? In opening up the home mortgages market to borrowers with terrible credit histories, he created the subprime crisis. Or is that Republican propaganda? Would love to be educated on this.

[dmc444]

There another article arguing about Reagans role.

Available here Blame Reagan for our financial mess? - MSN Money

[aodh_rua]

He also abolished the Act that separated commercial and investment banking. Robert Rubin was it?

I think the repeal of Glass-Steagall has to be seen as a big contributing factor to the cross-contagion in the financial system (as I wrote back in October).

[cactusflower]

This is more convincing to me:

We are living through a profound global financial crisis. That crisis has many proximate causes in the governance and deregulation of Wall Street. We have seen the astounding bailout of Bear Stearns using $30 billion plus in public money—Bear Stearns – an investment bank, an enterprise that prided itself on being in the business of cowboy capitalism, business without a safety net.

But the real roots of the crisis do not lie on Wall Street. The cause of the crisis can be found in the long-term weakening of the real American economy in an era of globalization—in closed factories, outsourced high tech jobs and low wage jobs with no benefits, and in the unsustainable effort to maintain middle class living standards through borrowing. It is to be found in the reality of lives like that of Kimberly Somsel of Westland Michigan, a member of the AFL-CIO’s community affiliate Working America, an unemployed single mother of two battling breast cancer and facing foreclosure due to a ballooning “2 and 28” loan payment. She is selling the family car and her furniture just to get by. Five houses on her block are threatened with foreclosure.

Powerful voices in our country say that public resources should be there for Bear Stearns, but not for Kimberly Somsel, to keep the champagne flowing on Wall Street, but not to build a future for Michigan.

Wages haven't gone up in the US for the last 30 years.

Then, in the 1980’s, the United States began to set the course that led to the present economic crisis. This was the period when both the Reagan administration and the business community began to seriously attack the institutions that drove the high wage postwar economy.

In labor market policy, this was not a gradual development. In 1980, something fundamentally changed. You can see it here on the graph of real wages and productivity. They were decoupled. The mechanism for their decoupling was a fascinating development in labor law. You can search Lexis and Westlaw and you won’t find it. It was neither a statute, nor a regulation or a case. It was instead an executive order that on its face applied to the very narrow circumstances of a strike by air traffic controllers. In the first days of his administration, President Ronald Reagan responded to a strike by air traffic controllers by ordering the firing of the striking controllers and their replacement by “replacement workers.”

Unemployment rose under Reagan and rose again under Clinton, but with lower wages.

Since 1980, the labor law regime, the tax regime and our approach to globalization have resulted in downward pressure on wages in the United States and a soaring trade deficit. As I showed a moment ago, although the productivity of U.S. workers has improved dramatically since 1980, U.S. workers real wages have remained flat, with the exception of a brief period in the late 1990’s, at the height of the tech and telecom asset bubbles and before China really became a force in U.S. markets. You might think that downward pressure on wages would mean less consumer spending. But up until recently, there was a solution to the threat that stagnant real wages would mean stagnant consumer spending.

That solution was debt financed asset bubbles. And oddly enough, the trade deficit itself, combined with strategic behavior by our trading partners, for a time provided the debt financing for these asset bubbles and the high levels of consumer spending associated with those bubbles.

America doesn't earn enough for its people to buy houses, and what is earned disproportionately goes to those who already rich. They gave out loans anyway and sold the debts in diced up form across the world.

[toughbutfair]

I think the repeal of Glass-Steagall has to be seen as a big contributing factor to the cross-contagion in the financial system (as I wrote back in October).

That seems to be the consensus in America. Since the law passed forbidding Irish people criticising St Bill, this hasn't got much publicity.

[sandar]

well its hard to specifically balme clinton and just clinton. The thing is clinton and greenspsan and brown thought they were practising laiisez faire, they werent't they were just l;azy, thinking that as long as the books looked good this month they didnt need to do anything else.......this crisis is the consequence of that.
Markets are never wholly rational....the governments job is to act as a counterweight to achieve equilibrium, but clinton, while a good president in many ways and better than the man who preceded him and the man who succeeded him, just wanted power for its own sake.....

[142857]

Clinton + Bush Administrations, Congress, The Federal Reserve...

[youngdan]

The thing is clinton and greenspsan and brown thought they were practising laiisez faire, .....

I honestly thought I had seen it all on this site but this shatters all records.