Why the Financial Meltdown Reflects the Fundamental Failure of the Bush-McCain Economic Philosophy

By Robert Cramer
The financial meltdown on Wall Street is more than a cyclic correction brought on by a mismanaged business cycle. It is emblematic of a problem at the very foundation of the right wing economic philosophy that became conventional wisdom during the Bush years -- and would be continued in a McCain presidency.

The zealots of unfettered "free markets" cast aside the critical lesson that the world learned during the Great Depression: left to their own devices, unregulated financial markets do not necessarily function to benefit the society as a whole -- or, in the end, even many individual market participants.

The fundamental premise of right-wing economics is the incorrect view that if every market actor pursues his own economic interest, the "invisible hand" of the market place will assure that the "common good" results. But of course, common sense tells us that is not always true. Two quick examples:

The first is referred to as the "tragedy of the commons." Suppose an island nation depends on the fishing harvests from the surrounding sea for its livelihood. It would obviously be in the interest of the community never to take more fish from the sea than can be replenished through the reproduction of fish. That way, everyone on the island will continue to have fish for the long haul.

But it is in the interest of each individual fisherman to catch as many fish as he can. This is especially true if the fish stocks grow scarcer. To continue to have enough fish for himself and his family, each fisherman competes more and more vigorously for the remaining fish. In the end, this behavior will assure that the fish supply is depleted, and that no one has any fish.

In this situation, if everyone pursues his own individual interest, the common good is not served. But if everyone looks out for each other, and recognizes that all have a common group interest, they will manage the fish resource to assure a self-sustaining fish supply that can feed everyone for years to come.

The other example is the classic case of economic recession. In a recession, it is in each economic actor's self-interest to increase his savings and cut spending, since the recession threatens his income. But by each pursuing his own individual interest, all of the actors together reduce the economy's overall spending. And that deepens the recession. If, on the other hand, the entire group of economic actors works through its government to increase national spending and reduce overall savings, it will stimulate the economy and the recession will end -- benefiting everyone.

The American mortgage market now provides us with another clear example of how this fundamental premise of right-wing economic thought is dead wrong.

For many years after the Great Depression, most mortgages were provided by banks and savings and loans. Traditionally these institutions would originate their own loans, evaluate the risk, and maintain a relationship with the borrower. It was in the self-interest of the institution to make loans -- that's how it made money. But it was also in the institution's interest to assure that the borrower could pay the loan back, because it was lending its own money.

Over the last thirty years, the mortgage market has fundamentally changed. Now most loans are originated by brokers or other mortgage companies who make their money through "origination fees" and often payments from big, unregulated lenders. Once these loans are made, they are then packaged and sold as securities through the secondary mortgage market.

Mortgage originators had every incentive to make all the loans they could, but absolutely no incentive to assure that the borrowers could pay the loans back. Credit standards were relaxed, new "sub prime" products were introduced, "no-document" loans were issued.

This system provided a great deal of liquidity to the mortgage industry. But it also removed the risk of making the loan from the loan originator and handed it to a huge, diffuse "market." No longer did any individual or institution have any individual incentive to prevent bad loans.

The problem was simultaneously hidden and exaggerated by the creation of complex derivatives -- securities that sliced and diced the risk and allowed it to be sold and resold.

As long as housing prices went up, the problem of bad loans were hidden by the rising equity of the collateral -- the homes that were being financed. But once prices stopped rising and began to drop, the bottom fell out.

Left to its own devices, the mortgage market itself could not solve this problem. It was in the loan originator's interest to issue more and more risky loans and it wasn't in the interest of any individual market player to control for risk, since the securities representing that risk could be sold a minute after they were purchased.

The only solution to this problem would have been the kind of regulation that was put into place for banks during the New Deal. With banks and with savings and loans, regulators guarantee a substantial portion of the depositor's money, but they also ensure that the mix of loans and the bank's overall financial structure is sound. Today the major source of mortgage capital is not banks or savings and loans, but from financial institutions that are almost free of regulation.

The same went for the two institutions that were set up to create this "secondary mortgage market," Fanny Mae and Freddie Mac, before they were taken over by the government last week.

The kind of regulation that was necessary was opposed by the Bush administration -- and the entire right wing business and economic establishment -- that is trying desperately to hold onto power by electing John McCain to continue the Bush presidency.

So now the chickens are coming home to roost. The taxpayers are helping to bail out some of the players, the stock market is tanking, mortgages are harder to get -- further reducing home values and making the problem worse.

And unbelievably, John McCain told his audience that he would "clean up Wall Street."

John McCain's chief economic adviser is Phil Gramm -- a former economics professor -- who is now Vice Chair of UBS, a huge international financial company. He's the guy who said that the problems of the American economy were "in the minds" of the American people -- that we are "a nation of whiners." Gramm is an ardent advocate of precisely the right wing economic philosophy that caused this problem in the first place.

Gramm and McCain believe in letting the guys with all the money do pretty much what they want because, they say, it will ultimately benefit us all. They are the ultimate crusaders for "trickle down economics."

The problem is that the foundational principles of this economic view have been proven wrong by history. And after a while, the victims are no longer limited to the vast majority of Americans that has suffered for the last eight years -- the pain even spreads to the wealthiest denizens of Wall Street. As Barack Obama said yesterday, we hear a lot about the benefits of the economy "trickling down;" now we're beginning to see the pain of the economy "trickle up."

The central lesson of this saga is clear. If you like the Bush economy, hire McCain. Over the next seven weeks, however, Americans who care about our economic future have to join Barack Obama in saying: enough.

McCain Seen as Less Likely to Bring Change

Complete Poll Results (pdf)

WASHINGTON — Despite an intense effort to distance himself from the way his party has done business in Washington, Senator John McCain is seen by voters as far less likely to bring change to Washington than Senator Barack Obama. He is widely viewed as a “typical Republican” who would continue or expand President Bush’s policies, according to the latest New York Times/CBS News poll.
Polls taken after the Republican convention suggested that Mr. McCain had enjoyed a surge of support — particularly among white women after his selection of Gov. Sarah Palin of Alaska as his running mate — but the latest poll indicates “the Palin effect” was, at least so far, a limited burst of interest. The contest appeared to be roughly where it was before the two conventions and before the vice-presidential selections: Mr. Obama had the support of 48 percent of registered voters, compared with 43 percent for Mr. McCain, a difference within the poll’s margin of sampling error, and statistically unchanged from the tally in the last New York Times/CBS News poll, in mid-August.
The poll showed that Mr. McCain had some enduring strengths, including a substantial advantage over Mr. Obama as a potential commander in chief. It found that for the first time, 50 percent of those surveyed in the Times/CBS News poll said they considered that the troop build-up in Iraq, a policy that Mr. McCain championed from the start, had made things better there.
The poll also underlined the extent to which Mr. McCain’s convention, and his selection of Ms. Palin, had excited Republican base voters about his candidacy, which is no small thing in a contest that continues to be so tight: 47 percent of Mr. McCain’s supporters described themselves as enthused about the Republican Party’s presidential ticket, almost twice what it was before the conventions. As often happens at this time of year, partisans are coalescing around their party’s nominees and independents are increasingly the battleground.
But the Times/CBS News poll suggested that Ms. Palin’s selection has, to date, helped Mr. McCain only among Republican base voters; there was no evidence of significantly increased support for him among women in general. White women were evenly divided between Mr. McCain and Mr. Obama; before the conventions, Mr. McCain led Mr. Obama among white women, 44 percent to 37 percent.
By contrast, at this point in the 2004 campaign, President Bush was leading Senator John Kerry of Massachusetts, the Democratic challenger, by 56 percent to 37 percent among white women.
Among other groups, Mr. Obama had a slight edge among independents, and a 16-percentage-point lead among voters ages 18 to 44. Mr. McCain was leading by 17 points among white men and by the same margin among voters 65 and over. Before the convention, voters 65 and older were closely divided. In the latest poll, middle-age voters, 45 to 64, were almost evenly divided between the two.
The latest Times/CBS News nationwide telephone poll was taken Friday through Tuesday with 1,133 adults, including 1,004 registered voters. The margin of sampling error is plus or minus three percentage points for all respondents and for registered voters.
The poll was taken during a period of extraordinary turmoil on Wall Street. By overwhelming numbers, Americans said the economy was the top issue affecting their vote decision, and they continued to express deep pessimism about the nation’s economic future. They continued to express greater confidence in Mr. Obama’s ability to manage the economy, even as Mr. McCain has aggressively sought to raise doubts about it.
This poll found evidence of concern about Ms. Palin’s qualifications to be president, particularly compared with Senator Joseph R. Biden Jr. of Delaware, Mr. Obama’s running mate. More than 6 in 10 said they would be concerned if Mr. McCain could not finish his term and Ms. Palin had to take over. In contrast, two-thirds of voters surveyed said Mr. Biden would be qualified to take over for Mr. Obama, a figure that cut across party lines.
And 75 percent said they thought Mr. McCain had picked Ms. Palin more to help him win the election than because he thought that she was well qualified to be president; by contrast, 31 percent said they thought that Mr. Obama had picked Mr. Biden more to help him win the election, while 57 percent said it was because he thought Mr. Biden was well qualified for the job.
This poll was taken right after Ms. Palin sat down for a series of high-profile interviews with Charles Gibson on ABC News.
Over the last two weeks, Mr. McCain has increasingly tried to distance himself from his party and President Bush, running as an outsider against Washington. The poll suggested the urgency of Mr. McCain’s task: The percentage of Americans who disapprove of the way Mr. Bush is conducting his job, 68 percent, was as high as it has been for any sitting president in the history of New York Times polling. And 81 percent said the country was heading in the wrong direction.
The poll found that 46 percent of voters thought Mr. McCain would continue Mr. Bush’s policies, while 22 percent said he would be more conservative than Mr. Bush. (About one-quarter said a McCain presidency would be less conservative than Mr. Bush’s.) At a time when Mr. McCain has tried to appeal to independent voters by separating himself from his party, notably with his convention speech, 57 percent of all voters said they viewed him as a typical Republican, compared with 40 percent who said he was a different kind of Republican.
Although nearly half of voters also described Mr. Obama as a typical Democrat, the party’s brand is not as diminished as the Republicans’; the Democratic Party had a favorability rating of 50 percent in August, compared with 37 percent for the Republicans, a fairly consistent trend in the Times/CBS News Poll since 2006, and part of the general political landscape that many analysts believe favors the Democrats.
In one of the sharpest differences highlighted in the poll, 37 percent said that Mr. McCain would bring real change to Washington, up from 28 percent before the two parties’ conventions. But 65 percent of those polled said that Mr. Obama would bring real change to Washington.
Despite weeks of fierce Republican attacks, Mr. Obama has maintained an edge on several key measures of presidential leadership, including economic stewardship. Sixty percent of voters said they were confident in his ability to make the right decisions on the economy, compared with 53 percent who felt that way about Mr. McCain. Sixty percent also said he understood the needs and problems “of people like yourself,” compared with 48 percent who said that of Mr. McCain.
More than twice as many said an Obama presidency would improve the image of the United States around the world, 55 percent, compared with those who believed a McCain presidency would do so. Mr. Obama also gets high marks for “sharing the values most Americans try to live by,” despite concerted Republican efforts to portray him as elite and out of touch with average voters. Sixty-six percent said Mr. Obama shared their values, compared with 61 percent who said that about Mr. McCain.
Mr. McCain, however, was maintaining some core advantages, particularly on preparedness to be president and ability to serve as commander in chief. Forty-eight percent said Mr. Obama was prepared enough to be president, compared with 71 percent who rated Mr. McCain as adequately prepared.
Fifty-two percent said it was “very likely” that Mr. McCain would be an effective commander in chief, twice as many as felt that way about Mr. Obama.
The two men received similar rankings when voters were asked about what had long been perceived as a McCain strength: the ability to make the right decisions about the war in Iraq. Fifty-two percent said they were “very” or “somewhat” confident in Mr. Obama’s ability on this front; 56 percent said they felt that way about Mr. McCain.
In general, Ms. Palin was viewed more favorably (40 percent) than unfavorably (30 percent). She was particularly popular among fellow Republicans, conservatives and white voters who describe themselves as evangelical Christians, which explains her energizing effect on the Republican base. Nearly 70 percent of Mr. McCain’s supporters said they were enthusiastic about the selection of Ms. Palin; 27 percent of Mr. Obama’s supporters said they were enthusiastic about the selection of Mr. Biden.
When asked who they thought would win in November, 45 percent said Mr. Obama and 38 percent said Mr. McCain.

If McCain Had His Way, That'd Be Our Social Security Money Wall Street is Losing

What do we democrats have to say about the mess on Wall Street?
Today Obama said it proves that the Republican economic philosophy has failed, and I heard him mock McCain for calling for a commission because "we know how we got into this mess." Now some people think about things like "economic philosophy" a lot, and many have at least a general notion of how we got into this mess. But even though everybody cares how much money ends up in their pockets, most people are understandably a little fuzzy about all the policies and philosophies and market forces behind our very complex economy. To further confuse the issue, McCain is also saying something about reform, and taking on "fat cats," and accusing Obama of being just as cozy with these Wall Streeters as anyone else. And at this point, slightly more voters trust John McCain to handle the economy than trust Barack Obama.

As it happens, though, not that long ago we had a rare political moment in this country, a moment where the public sat up and took notice of economic policy -- and spoke out and made its voice heard too. When George W. Bush made it to term #2, he decided to try to privatize social security to reward his supporters on Wall Street with a new source of capital, customers, and fees. (Those would be the same people whose firms are now cratering under the weight of the bad debt they recklessly took on while Republican regulators looked the other way.) But as it turned out, we Americans were not about to let our elected representatives turn over our social security taxes to Wall Street financiers to gamble with if it meant losing the guaranteed income that has allowed millions upon millions of American seniors to live out their sunset years with at least a basic measure of dignity.

But while ordinary Americans spoke out, John McCain stood with Bush (hugged him awkwardly in public, even), against the American people. In fact, just six months ago, McCain again let slip his fondness for privatization.

I have been scratching my head why this has not been talked about more, especially since Obama has been having trouble winning votes among seniors. There may well be some good reason I'm missing why it hasn't been a top argument thus far.

But now that you can't look at a newspaper or TV screen without seeing the mayhem on Wall Street, it's time to remind Americans what the world would look like if John McCain was in charge of our economic policy. Plenty of people are losing plenty of their retirement savings as it is. But if we had let Bush and McCain privatize social security, some of those people would be losing a lot more. And a lot of other people with less retirement savings would be hurting even more, because they depend on social security to cover basic needs.

This is something Americans understand: social security is secure, and the stock market is anything but. There are few more personal or dramatic ways to illustrate McCain's terrible judgment than to imagine the nightmare scenario so many Americans would face if McCain and Bush had gotten their way on this -- or if McCain were to get his way as President.

When Wall Street's woes are the top story, this should be our top talking point.

How Much Have Taxpayers Coughed Up for the Most Secretive White House Ever?

By Willam Fisher,
According to a new study, the Bush administration has spent almost $200 on keeping secrets to every dollar allocated to open them
NEW YORK -- The administration of President George W. Bush continues to expand government secrecy across a broad array of agencies and actions -- and at greatly increased cost to taxpayers, according to a coalition of groups that promote greater transparency.
Dr. Patrice McDermott, director of Open the Government, a watchdog group, told IPS, "The federal government under the Bush administration has shown its commitment to secrecy by where it has put its money -- more no-bid contracts, fewer government employees processing FOIA [Freedom of Information Act] requests, less on training on classification issues, and almost $200 spent on keeping secrets to every dollar allocated to open them."
"Given our growing deficit, the next administration faces difficult choices in restoring accountable government," he added.
In its "Secrecy Report Card 2008," released Sept. 9th, the group concluded that the Bush administration "exercised unprecedented levels not only of restriction of access to information about federal government's policies and decisions, but also of suppression of discussion of those policies and their underpinnings and sources."
Open the Government is a Washington-based coalition of consumer and good government groups, librarians, environmentalists, labour, journalists, and others.
It says that that classification activity remains significantly higher than before 2001. In 2006, the number of original classification decisions increased to 233,639, after dropping for the two previous years.
The government spent $195 maintaining the secrets already on the books for every one dollar it spent declassifying documents in 2007, a five percent increase in one year.
At the same time, fewer pages were declassified than in 2006. The nation's 16 intelligence agencies, which account for a large segment of the declassification numbers, are excluded from the total reported figures.
Classified or "black" programs accounted for about $31.9 billion, or 18 percent of the fiscal year (FY) 2008 Department of Defense (DOD) acquisition funding requested last year. Classified acquisition funding has more than doubled in real terms since FY 1995.
Almost 22 million requests were received under FOIA in 2007, an increase of almost 2 percent over the previous year. But a 2008 study revealed that, in 2007, FOIA spending at 25 key agencies fell by $7 million, to $233.8 million, and the agencies put 209 fewer people to work processing FOIA requests.
While the secretive Foreign Intelligence Surveillance Court does not reveal much about its activities, the Department of Justice reported that, in 2007, the court approved 2,371 orders -- rejecting only three and approving two left over from the previous year. Since 2000, federal surveillance activity under the jurisdiction of the court has risen for the ninth year in a row -- more than doubling during the Bush administration.
The court was established under the Foreign Intelligence Surveillance Act in 1978 after revelations of the widespread wiretapping by the administration of Richard M. Nixon to spy on political and activist groups. Recently, efforts to reform the act have been triggered by the Bush administration's admission that it had conducted secret surveillance programs in the U.S. without warrants from the court.
In addition, more than 25 percent (worth $114.2 billion) of all contracts awarded by the federal government last year were not subject to open competition -- a proportion that has remained largely unchanged for the last eight years.
Investigations by Congress and independent government agencies of the war in Iraq have revealed billions of dollars in no-bid contracts, covering everything from delivering food and water to U.S. troops to providing armed security for U.S. officials and visiting dignitaries. There have been widespread allegations of waste, fraud and abuse by contractors. Several have been convicted and prosecutions of others are pending.
During 2007, government-wide, 64 percent of meetings of the Federal Advisory Committee were closed to the public. Excluding groups advising three agencies that historically have accounted for the majority of closed meetings, 15 percent of the remainder were closed -- a 24 percent increase over the number closed in 2006. These numbers do not reflect closed meetings of subcommittees and taskforces.
The Federal Advisory Committee Act was passed in 1972 to ensure that advice by the various advisory committees formed over the years is objective and accessible to the public.
The report also found that in seven years, President Bush has issued at least 156 "signing statements", challenging over 1,000 provisions of laws passed by Congress. In 2007, eight were issued.
The so-called "state secrets privilege" -- invoked only six times between 1953 and 1976 -- has been used by the Bush administration a reported 45 times, an average of 6.4 times per year in seven years. This is more than double the average (2.46) in the previous 24 years.
The "state secrets privilege" is a legal doctrine that contends that admission of certain information into court proceedings would endanger U.S. national security. The Bush administration has frequently invoked the privilege to dismiss lawsuits that would be embarrassing to the government, and the courts have generally been deferential to the government's claims.
National Security Letter (NSL) requests continued to rise; the 2007 numbers are still classified, but the recently unclassified new number for 2006 shows a 4.7 percent increase in requests over 2005. Since enactment of the USA Patriot Act in 2001, the number of NSLs issued has seen an astronomical increase.
The NSL provision of the Patriot Act radically expanded the authority of the Federal Bureau of Investigation (FBI) to demand personal customer records from Internet Service Providers, financial institutions and credit companies without prior court approval.
Through NSLs, the FBI is authorized to compile dossiers about innocent people and obtain sensitive information such as the web sites a person visits, a list of e-mail addresses with which a person has corresponded, or even unmask the identity of a person who has posted anonymous speech on a political website.
The provision also allows the FBI to forbid or "gag" anyone who receives an NSL from telling anyone about the record demand.

Just Like Bush White House, Palin Uses Personal E-mail Accounts And Claims Executive Privilege

Sarah Palin's Personal Emails
The Washington Post reports that Gov. Sarah Palin (R-AK) is “being asked by a local Republican activist to release more than 1,100 e-mails she withheld from a public records request, including 40 that were copied to her husband, Todd.” Invoking a favored practice of the Bush administration, Palin has claimed executive privilege to keep the e-mails secret — despite the fact many of them were sent to Todd, who is not an elected official.

What’s more, Palin and her staff intentionally use her personal Yahoo e-mail account, perhaps to avoid document release requests:

Palin also routinely does government business from a Yahoo address, gov.sarah@yahoo.com, rather than from her secure official state e-mail address, according to documents already made public.

“Whoops!” Palin aide Frank Bailey wrote, after addressing an e-mail to the governor’s official state address.

“Frank, This is not the Governor’s personal account,” a secretary reminded him.

The lawyer filing the request pointed out that the point of government e-mail is to ensure “security and encryption.” “She’s running state business out of Yahoo?” he asked. Mother Jones reports that Palin’s refusal to hand over e-mails stands in violation of the Alaska Public Records Act.

Palin’s move is eerily reminiscent of Bush administration ploys to dramatically increase secrecy in government, such as when White House aides switched to personal e-mail accounts to avoid subpoenas during the investigation into U.S. Attorney scandal last year:

But just a week after E-mails in the U.S. attorneys case became a main focus of congressional Democrats probing the firings, several aides said that they stopped using the White House system except for purely professional correspondence. […]

At least two aides said that they have subsequently bought their own private E-mail system through a cellular phone or Blackberry server. When asked how he communicated, one aide pulled out a new personal cellphone and said, “texting.”

As Josh Marshall pointed out at the time, if the White House was using personal e-mails, “they can’t have even the vaguest claim” to executive privilege. Similarly, the fact that Palin copies her husband on her e-mails and often uses a personal account raises the question of whether her e-mails are actually official executive business.

Palin’s commitment to secrecy and her stonewalling of an ethics investigation into her role in “Troopergate” are more evidence that a McCain-Palin administration would be little more than a third Bush term.

Down Days for McCain

When it's September and important issues cry out for attention but we seem consumed by trivia -- watch out.
In September 2001, cable news and even some "serious" newspapers were preoccupied with Gary Condit, a married California congressman who had an affair with a Justice Department intern who disappeared and later was found murdered.
The news was all Condit, all the time -- until Sept. 11, when something far more consequential happened and Condit slipped back into obscurity.
This year a calamity has occurred in the financial world. The nonsense about Sarah Palin's family dynamics and other matters, down to and including lipstick on pigs, has been banished by the mayhem on Wall Street as ruthlessly as the Condit story was erased seven years ago.
Once again, New York is the focus of the nation, and the amount of mass media concentrated there guarantees that this economic crisis will remain where it belongs -- at the center of attention.
The presidential candidates certainly recognize the change. It took less than 24 hours after Sunday's dramatic developments involving Lehman Brothers, Merrill Lynch and AIG for John McCain and Barack Obama to prepare new statements and fresh ads on Wall Street issues.
But McCain stumbled at the outset with a comment that the economy is "fundamentally sound," and the Democrats pounced. Obama, campaigning in Colorado, delivered an unusually tough critique of McCain's long record as an advocate of deregulating markets. Obama's message was reinforced by an orchestrated chorus of Democratic voices, liberated from their preoccupation with the governor of Alaska and her family.
Neither man had much to offer in the way of advice. The meetings of Treasury, Federal Reserve and banking officials in New York were dealing with questions of such technical complexity and financial importance that the politicians knew better than to intervene.
That lack of content does not reduce the political significance of what has happened. For months, McCain's managers have understood that his biggest challenge is that eight out of 10 Americans think the country is moving in the wrong direction. There are relatively few things McCain can do to overcome the voters' natural inclination to punish the party in power.
One is to sow doubts about Obama and his prospective actions, and McCain has been assiduous in doing that. He and his cohorts have questioned Obama's experience, criticized his tax policies and challenged his approach to energy issues.
Another is to create a narrative that diverts attention from the voters' fundamental dissatisfaction. That was the purpose of McCain's reform initiative -- a narrative rooted in his own rebel personality and anti-establishment history, reinforced by the choice of Palin as his running mate. That story line was launched well at the Republican National Convention, and it tightened the race.
But now the structural weaknesses in the economy -- already visible in rising unemployment and stagnant incomes for most workers -- have caught up with some of the most famous players in the game. The jobs and savings sacrificed in the great stock market sell-off were significant in themselves. And these were potential Republican voters who took this shellacking. They and their friends and neighbors will be that much harder to enlist in the McCain cause.
The larger effect is the psychological damage to an electorate already struggling to maintain any optimism about the country and its future. For all the excitement Palin has generated, the national mood is still a major barrier for McCain and the Republicans.
There may be other external events that jolt the presidential race -- and the debates are still to come. But for now, Wall Street and its woes are causing big problems for John McCain.

McCain Enabled Economic Meltdown

McCain voted for abolishing all of the significant rules put in place at the time of the Great Depression designed to prevent a repeat.
Gag me with a spoon, as Valley girls used to say. Did you see that McCain-Palin ad promising "tougher rules on Wall Street to protect your life savings, no special interest giveaways"? Just how dumb do they think we are?
Seriously, 20 minutes of Google searches should be sufficient to convince all but the dimwits among us that John McCain has been a master of the special-interest giveaways to Wall Street that enabled this meltdown. He voted for abolishing all of the significant rules put in place at the time of the Great Depression designed to prevent a repeat. The two main bills accomplishing that, bills which McCain enthusiastically supported, were the Commodity Futures Modernization Act and the Gramm-Leach-Bliley Act. The Gramm is former Sen. Phil Gramm, who was chair of the Senate Banking Committee when he acted as chief sponsor of both pieces of legislation. The same Gramm that McCain picked to co-chair his presidential campaign.
Gramm proved an embarrassment when he cavalierly insisted there was no real crisis but only the panic of "whiners," but even on Monday as his "Crisis" ad ran, McCain, in person, was still denying that there was one. "The fundamentals of our economy are strong," he told NBC's Matt Lauer, as two more of the nation's most venerable financial institutions crashed and the stock market shed more than 500 points. When a perplexed Lauer asked McCain to square his optimism with his own ad's use of the crisis word, McCain came to his senses and, discovering his inner Karl Marx, insisted he hadn't been speaking of the bankers but rather was saying "that the workers of America are the fundamentals of the economy."
OK, but never heard that from him before, as he consistently carried water for the bankers going back to his supporting role in the savings and loan scandal, a harbinger of the consequences of a severely deregulated financial market that McCain still favors. Nor did he worry then about the workers who lost their savings while McCain's wife made a million in profit from her deal with Charles Keating, the banker for whom McCain lobbied. Even on Tuesday, while McCain suddenly was thundering against the "unbridled corruption and greed that caused the crisis on Wall Street," he still did not urge anything more stringent than convening a national commission.
Barack Obama has been way ahead of McCain in grasping the severity of the problem and back in March offered a scorching criticism of the deregulation mania, in particular the Gramm-Leach-Bliley law, which allowed the stockbrokers, insurance companies and banks to merge for the first time since the 1930s, ushering in this era of irresponsibility. But that was in the primaries, and now he has turned for advice to Robert Rubin and Lawrence Summers, who both served as treasury secretaries in the Clinton administration and talked the president into signing that wretched legislation.
As recently as Jan. 31, Rubin, by then Citigroup's executive committee chair, was, like McCain until Tuesday, still in denial on the meltdown, insisting it was merely "all part of a cycle of periodic excess leading to periodic disruption." Fortunately, at that time he was an adviser to Hillary Clinton and remained so past March 27, when Obama delivered his main economic speech blaming for the meltdown the Gramm deregulation that Rubin had helped make law. Referring to the repeal of the Depression-era regulations, Obama stated all too correctly: "Unfortunately, instead of establishing a 21st century regulatory framework, we simply dismantled the old one -- aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so, we encouraged a winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy."
Not devastating for Rubin and Citigroup, where Rubin went to work, and which was a leader in that $300-million lobbying effort and the first huge beneficiary of the new law that permitted a merger with Travelers Insurance that previously had been illegal.
So, yes, there is a world of difference between Obama and McCain on the main issue that now challenges the American way of life, in which people's homes, retirement, kids' college education and all other dreams are threatened by a mindless deregulation led by the Republicans but which too many influential Democrats supported. What Obama needs to do, both to win and to help save the country, is denounce the whole lot of those scoundrels from both parties and rediscover his populist voice.