As often as not, I find myself agreeing with professor Paul Krugman on economic issues. We both were named one of the 14 Most Strident Critics of Obama; we each have been critics of bailing out insolvent zombie banks; neither of us cared for Hank Paulson’s massive monetary giveaways.

We’ve also disagreed on things, most recently Securitization.

But last week, Krugman blamed much of the credit crisis and economic collapse on President Ronald Reagan.

I found that position unsupported by the facts. I assign only modest culpability to RR in Bailout Nation for a) appointing the ruinous Alan Greenspan to FOMC Chief; and 2) pushing the deregulation movement forward. Yes, that movement eventually became radicalized by the likes of Greenspan and Enron Texas Senator Phil Gramm (and others) — but that took place long after Reagan left office. And, I hold Bill Clinton much more responsible, for such foolish acts as the repeal of Glass Steagall and the passage of the Commodity Futures Modernization Act.

Then on Monday, Krugman totally perplexed me; he essentially exonerated George W. Bush for much of what went wrong economically:

“What would have happened if hanging chads and the Supreme Court hadn’t denied Al Gore the White House in 2000? Many things would clearly have been different over the next eight years.

But one thing would probably have been the same: There would have been a huge housing bubble and a financial crisis when the bubble burst. And if Democrats had been in power when the bad news arrived, they would have taken the blame . . .”

The professor is wrong about this. The facts do not support his perspective.

Note that this isn’t a political harangue, it is a policy critique. (The same way I critique Obama) When we look at the details of W’s 2 terms — the policies, appointments, judgment calls and overall philosophy that were the hallmarks of the Bush Administration’s economic policies — they were uniformly terrible. Time and again opportunities to avoid or reduce the disaster were missed, poor decisions were made, the wrong person (i.e., Hank Paulson, Harvey Pitt, etc.) were put into key positions.

Blaming Reagan makes little sense, exonerating Bush makes even less sense.  In just about every way a President could make an economic crisis worse, George W. Bush did.

Consider this excerpt:

But it was George W. Bush’s appointments who chanted the “laissez faire, free markets reign supreme” mantra the loudest. The SEC chairs he appointed were terrible, and many of his other appointments—Office of Thrift Supervision, Federal Reserve, Treasury secretary, and other key regulatory roles—were similarly ill-advised.

Question: What do you get when a president who doesn’t believe in government appoints those who share this philosophy to key regulatory and supervisory roles?

Answer: Neither regulation nor supervision.

Missed opportunities seem to be a hallmark of the Bush presidency: As the various crises unfolded, there were key choke points where  the damage could have been contained. None were acted upon until after the crisis had fully flowered.

When appraisers petitioned the White House in 2001, complaining of inflated home appraisals filed by corrupt home inspectors, they were rebuffed. When state banking regulators recognized signs of lending fraud early on, their attempts to curtail it were prevented by Bush.

The White House asserted that it was the federal agencies—and not the states—that had jurisdiction over federally chartered banks. That’s a fine argument to make, until those federal agencies recognized lending problems and began proposing rules to curtail them on their own. They, too, were rebuffed by the White House—not state agencies, but the federal agencies the White House claimed had exclusive jurisdiction.

The Associated Press (AP) summed up why the very government regulators assigned to prevent abuse failed so miserably to do so: “The administration’s blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.”

As to Al Gore, we do not, of course, have the counter-factual. No one knows what decisions Gore would have made. But it is hard to imagine that anyone else could have done as poor a job as the W gang that could not shoot straight.

In exonerating the British PM, Krugman inadvertently excuses the horrific reign of error of George W. Bush. That is a mistake on his part . . .

>

If there is interest, I will post additional book excerpt related to this . . .

>

Previously:
Paul Krugman is Wrong About Securitization (March 28th, 2009)

http://www.ritholtz.com/blog/2009/03/krugman-is-wrong-about-securitization/

The 14 Most Strident Critics of Obama (April 30th, 2009)

http://www.ritholtz.com/blog/2009/04/the-14-most-strident-critics-of-obama/

How Much is Reagan Responsible for Bailout Nation (June 1st, 2009)

http://www.ritholtz.com/blog/2009/06/how-much-is-reagan-responsible-for-bailout-nation/

Source:
Reagan Did It
PAUL KRUGMAN
NYT, May 31, 2009

http://www.nytimes.com/2009/06/01/opinion/01krugman.html

Gordon the Unlucky
PAUL KRUGMAN
NYT, June 7, 2009

http://www.nytimes.com/2009/06/08/opinion/08krugman.html

Category: Bailout Nation, Credit, Derivatives, Politics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

76 Responses to “Krugman’s Crisis Responsibility: Reagan or Bush ?”

  1. Bill Fleckenstein says:

    Now for a rant. First of all, let me say that I almost never read Paul Krugman’s columns, as I noticed several years ago that he has an uncanny ability to understand the problem but totally misdiagnose the cause.

    During the “W” years, Krugman would frequently cite an economic problem and then go out of his way to blame him. A lot of poor decisions did flow from Bush, as he was basically in over his head, but Krugman was a Johnny one-note when it came to him. Thus, I decided to forego his columns. The reason why I even read yesterday’s was due to its headline: “Reagan Did It.” I thought, wow, I need to see what this is all about.

    In it, he wants us to believe that all of our financial ills can be traced back to Ronald Reagan and deregulation. As usual, he does find the source of trouble, almost. He identifies a specific piece of legislation that he claims started us on the path to so much financial trouble in this country, that being the Garn-St. Germain Depository Institutions Act.

    Close, but no cigar. The offending cancerous legislation that in my opinion kicked off the move towards extra reckless lending was the Depository Institutions Deregulation and Monetary Control Act of March 31, 1980. It was enacted over two years earlier and almost one year prior to Reagan’s taking office. That legislation, which eliminated Regulation Q, contained a provision that increased the limit for deposit insurance from $40,000 to $100,000.

    Believe it or not, I felt in 1980 that it was a bad law because it would take away discipline from depositors, as the increase was far too excessive. (One hundred thousand dollars was a lot more money in 1982 than it is in 2009.) In any case, this line of thought will ring a bell for longtime readers because I often discussed it in the late 1990s.

    Tracing the Roots of Reckless Lending

    In fact, I made this very point at the height of the mania (in a speech titled “Spinning Financial Illusions — The Story of Bubblenomics,” which I gave at the Contrary Opinion Forum on October 1, 1999):

    “The seeds of this bubble were sown way back in 1980 when Congress passed the Depository Institutions Deregulation and Monetary Control Act calling for the phasing out of Regulation Q, which allowed financial institutions to compete with money market funds. A piece of that legislation was financial cancer: raising the insured deposit maximum to $100,000.00.

    “That seemingly innocuous change (thank you, Fernand St. Germain) spawned ‘brokered deposits,’ the primary driver of the reckless lending practices of the 1980s. Money sought out the highest bidder with no regard as to how it might be used.

    “As a result, we witnessed the funding of overleveraged LBOs and the overbuilding of real estate long after the 1986 Tax Act made it uneconomical to speculate in property. It is hard to overstate the significance of this legislation in creating the excesses of the 1980s, which set the stage for the even greater excesses of the 1990s.” (The entire speech can be found on the Special Features section of this Web site.)

    Back to Krugman’s column, he wraps up his indictment with a statement that demonstrates his utter lack of understanding about what transpired over the last 27 years: “There’s plenty of blame to go around these days. But the prime villains behind the mess we’re in were Reagan and his circle of advisers — men who forgot the lessons of America’s last great financial crisis, and condemned the rest of us to repeat it.”

    That is just nonsense. The person to blame for the increase in deposit insurance was none other than Fernand St. Germain himself, who saw to it that the deposit insurance hike was put into place. And, does anyone really think that Reagan is more culpable than Greenspan? He deserves the lion’s share of the blame, and Reagan had essentially nothing to do with it.

    It’s ironic that Krugman doesn’t even understand the fallacy of his own argument. Allowing deposit insurance to be increased by 250% took away market discipline as depositors dropped their guard about what the wild men running the S&Ls were doing with their money. In fact, that change of regulation — i.e., fiddling with the deposit-insurance limit in the deregulation legislation — is precisely what started the problem.

    Though Greenspan went a long way towards giving deregulation itself a bad name, it was really his incompetence — in the form of monetary policy and “leading” the Fed’s own inept effort at regulation — that were the primary twin drivers of this debacle.

    Perpetrators on Parade

    An example of Greenspan’s wrong-headed cheerleading: his advocacy of repealing the remnants of Glass-Steagall in 1999. (Although I happen to be in favor of deregulation generically, that doesn’t mean I favor deregulation always and everywhere.) However, even that poorly thought out idea would not have been as disastrous as it was had the SEC possessed the common sense to not allow financial firms to essentially leverage themselves to infinity.

    Also culpable are other “government-sponsored” bodies like the ratings agencies and the Financial Accounting Standards Board. They helped perpetrate the illusion of safety while the country attempted to speculate its way to prosperity — from whence we blew up.

    Deregulation generically didn’t cause this disaster. Incompetence and greed did. The implication from Krugman’s article, that regulation or re-regulation would solve the problem, is complete nonsense. What needs to happen is that people in a position of regulatory authority do their jobs.

    More Rules for Regulators to Ignore?

    But the Fed, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and all the Congressional committees, a.k.a., the “regulators” entrusted with powers of oversight did nothing as our financial problems built — and built in plain sight. (All along the way as these excesses built, many of us pointed them out in real time.) Passing new rules won’t solve anything and will only cost businesses/individuals more money, which they can ill-afford to spend at this time. A classic example: Sarbanes-Oxley, which caused a huge increase in paperwork and costs but did nothing to help prevent the financial system from nearly vaporizing.

    No, Mr. Krugman, Reagan didn’t do it. Greenspan did it, aided and abetted by almost everyone in the regulatory apparatus who failed to do their job.

  2. aitrader says:

    Be an equal opportunity culpist – blame both.

  3. franklin411 says:

    I think Krugman really, truly, deeply wanted a fundamental restructuring of the American economy, along the lines of what Europe did after WWII. Nationalization, cradle-to-grave welfare, and a fundamental reassessment of the American attitude towards wealth and prosperity. It’s pretty clear that the President is more like FDR than Lenin: he doesn’t want to overthrow the present system of capitalism in America; he wants to save it by making it more humane, rational, and above all, more open to *truly* free competition based on merit.

    I think privately, Krugman would agree that Bush is very much to blame for the housing crisis, as are many others. He is just using it as a rhetorical device to try to spur the President towards the more radical agenda Krugman would enact if he were King. IE, he’s trying to warn the President that he seems to be in the same current of Reaganism as Bush I, Clinton, and Bush II.

    I agree with him that Reaganism is the cancer that is killing America, though.

  4. rww says:

    I don’t know, BR. On the margins, yes, things could have been different. But the underlying problem — stagnant wages and no way other than housing price appreciation to maintain living standards — would have been the same and would have ended badly in any case.

  5. larster says:

    Krugman seems to be in the process of becoming the liberal O’Reilly/Limbaugh. IMO he shoots for controversy and common sense be damned. I thought that he was one of the few that understood early what was going to happen economically, but he is blowing any impact he might have with these foolish positions.

  6. william says:

    Let’s not forget that the democrats who supposedly look out for the “little guy” have controlled both houses of congress since January 2007. What did they do to avert this fiasco? What have they done to insure that this doesn’t happen again? It seems to me that they have only made matters worse.

    Sure, much of blame can be placed squarely at the feet of GWB and the republican party, but the democrats were willing accomplices.

  7. sparrowsfall says:

    Though in its broadness it is impossible to prove, I would make the assertion that Reagan bears prime responsibility for launching thirty years of magical thinking (in both the public and private spheres), which three decades we are now paying for.

  8. Ned Bushong says:

    >>In just about every way a President could make an economic crisis worse, George W. Bush did.<<

    I’m very happy you said that, It couldn’t be more true. And I might add, a real dissapointment to me. In the beginning, I thought he might be able to move America back to sanity. But he turned out to be the worst presiden, EVER.

    One thing that never gets said, straight forward, is that this entire mess was a ‘wall street problem’. It has never been a big banking problem or main street problem. Henry Paulson, with the help of Bush, created this problem. Now, Bam-bam is continiung to work from the same play book. I asume Bam-bam will be a one term president.

  9. Mannwich says:

    Barry’s really poking at the caged animals here at TBP with this post. I, for one, am not getting involved this time. I promise.

  10. toddie.g says:

    I place a great deal of blame on Ronald Reagan. Prior to Reagan’s presidency, the U.S. was a fiscally responsible country. The advent of high budget deficits and soaring national debts began with HIS presidency. The fact that nothing horrendous economically happened for several decades as a result of perennial massive deficits allowed for a mindset in the U.S. that nothing bad would EVER happen as a result of this accumulation of debt.

    Ronald Reagan should have made it part of his legacy before he left office to warn the nation that his economic prescription of heavy government borrowing was a short-term fix at the time, and not a philosophy to be permanently subscribed to. To my knowledge, he did not. Additionally, what Reagan did set the tone for the rest of the nation – a gigantic decades long trend of living on leverage in all sectors of the economy, i.e. government, corporate and finally the consumer.

    This all began with Reagan. His legacy deserves to be tarnished by it.

    ~~~

    BR: I disagree, butt hats what makes a horse race. When I look at what Clinton/Rubin/Summers did, and then 9even worse) what Bush/Greenspan/Gramm did, I draw the conclusion that Reagan’s culpability, relative to these others was minor.

  11. VennData says:

    Bush socialized AIG, Fannie, Freddie, GM, Chrysler, the TSA, the prescription drug insurance industry for seniors, nineteen banks …and Obama’s the “Socialist?” ROFL!

  12. willid3 says:

    rww, i am not sure its just stagnant wages, i think they have been collapsing (labor departments wages = $ paid and benefits. who thinks that income or should be called wages?). using tax data you can find out that incomes on average are where they were in 2000 or so.
    and
    william, while they dems ‘took control’ of Congress in 2007, it was such a small majority that they were barely in control. a one seat lead in the senate doesn’t do much, since it started taking 60 votes to get things done.
    and RR could only be responsible for the appointment of Greenspan, and fr the deregulation craze, but odly enough that craze predated him (but not by much, some of that started under Carter not RR).

    but i can’t imagine not laying the biggest part of this mess on Bush, with an assist to Clinton (for not stopping the senator from Enron).
    after all, it was his appointees who drove the bus over the cliff by not doing their jobs.

  13. Bruce in Tn says:

    Manny:

    I am with you. I have tried many times to tell these good people that blaming presidents gets you no where. Democrats or republicans. As I understand it, both houses of congress must pass a bill to get funding for a program. The Speaker of the House does what the president tells him to do? Republican or democrat? Not the last time I looked. And lobbyists seem not to care who is in, either..

    Come on guys..next time vote for Ron Paul…

  14. Mannwich says:

    @Bruce: It’s also time we started to hold OURSELVES responsible to some extent. If the public doesn’t pay attention and hold our public servants responsible (and we clearly don’t these days), then we should fully expect these things to happen. We get the leaders we deserve in a Democracy.

  15. JohnnyVee says:

    Opining about how Al Gore’s presidency would have been versus GWB’s actual presidency is pure speculation. It discounts Krugman’s credibility.

  16. Thor says:

    Bruce – I agree. How shitty is it that almost one third of the country is independent yet we still have no viable third party?

    I’m also with all of you that we shouldn’t blame any one president. This is an extremely complicated mess we find ourselves in and I think it’s narrow minded to try to point to one particular president, person, political party, regulator, as the cause. Let’s also not forget that “We The People” need to take a certain amount of responsibility too. Yes, many people were given loans for homes they could not afford, often by unscrupulous mortgage and real estate agents, but no one held a gun to anyone’s head and said “BUY THIS HOUSE!”

  17. The Curmudgeon says:

    To be sure, Reagan caused this whole mess, but not in the manner his detractors ascribe. He caused it by proving that capitalism can afford both guns AND butter, whereas communism can only provide the guns, thereby helping to bring an end to the only existential threat, i.e., the Soviet Union, that America faced.

    Every organization needs a competitor, or an enemy, to keep it sane and focused. We, i.e., the US Federal government, lacked one after the Berlin Wall fell. Things got stupid. The federal government, without its role as protector against Armageddon, needed to find a new role, or find itself declining in importance and relevance. No government anywhere ever willingly seeks to lessen its importance and power. So W/ Bush I, the feds became a policeman around the world, tackling petty dictators like Noriega and Hussein, just because it could. With Clinton it became the insurer of first resort, and the nanny state (but at least it balanced the budget). W/ Bush II, it expanded both roles, along the way precipitating a fiscal nightmare of deficits. Now it is expanding the nanny state and insurer of first resort for natural disasters and such to include financial and industrial disasters of our own making. And it is expanding its power and influence in a most insidious way–by laying claim huge claims to future income.

    All that said, none of these Presidents played a very big role in the present-day crisis, except by omission. This was a crisis brought on by the federal reserve’s refusal to do anything remotely unpopular (but necessary) since Volcker left. It was allowed to get away with its monetary mismanagement because it seemed to work through the nineties and early 00′s, but the good times of the nineties had more to do with the peace dividend wrought by Reagan (there’s the blame again) than any manipulations of the federal reserve. And to prove people are generally stupid, they gave the Fed the credit when things went well, yet little of the blame when everything fell apart. It is the nature of human beings to wish to affix a reason to things they don’t understand, even if the reason they decide upon derives from supersition and belief. Most don’t understand history or economics, so they turned Greenspan into a demi-god after seven or so fat years caused by forces he had nothing to do with. He relished the role, and played us for a bunch of fools as he tinkered with things just enough to make it look like he was in control such that masses were sated and the politicians remained employed.

    Greenspan was never in control (monetary manipulations can’t change real things), but basked in the illusion. He, and his successor, have exacerbated a reckoning that was coming regardless who was President or the Fed Chief.

    The central rule of the universe, that every administration since the fall of the Berlin Wall except Clinton’s has violated, is the one that says borrowing is okay, if put to purposes that enhance survivability and prosperity. Borrowing to win WWII? Smart. Borrowing to win the Cold War? Smart. Borrowing to juice consumption? Stupid. And that’s what we’ve been doing.

  18. Transor Z says:

    Last time I checked, Congress passes laws and the president either signs, vetoes, or signs and writes little notes about what he’s not going to obey.

    And then there’s this other branch, called the “Judiciary.” They interpret laws and stuff.

    And then there’s this fourth branch, called the “Federal Bureaucracy.” They represent the principle of Inertia.

    And then there’s this thing called “historic context” that exists inside and outside of all of these gentlefolk. Stuff like airliners crashing into skyscrapers, inherited Cold War, inherited unintended consequences of long-ago actions, etc. etc. etc. That represents the principle of Chaos.

    Pinning blame on systemic failures of long gestation on one individual is the intellectual equivalent of a People Magazine “Top 10 Sexiest People” list.

  19. Thor says:

    To add a bit of humor to the topic of our own culpability – Click on the onion logo in the middle of the USA in this link. Sad state of affairs when The Onion sums up a good part of our culture the best.

    http://www.theonion.com/content/atlas/

  20. CNBC Sucks says:

    Ritholtz, just so that I can say I went off-topic with a financial comment on a political post – as opposed to my customary political comment on a financial post – how about that price action on the long bond?

    http://blogs.wsj.com/marketbeat/2009/06/12/treasury-traders-on-wsj-fed-news-takes-a-lot-of-the-starch-out-of-expectations/

    I am now thinking of selling some FAZ and maybe going long on the SPY and USO.

  21. banudk says:

    its always worth considering the other side of the equation .Even if we agree that deregulation lead us to here ,is it not fair to consider what it also created i.e nearly 3 decades of growth which infact widened gap between US and rest of the world (esp Europe) .i agree some amt of finetuning is reqd but it doesnt mean abondoning the system and adapt more socialistic kind of system as suggested by prof Krugman .

  22. Bruce in Tn says:

    Curmudgeon:

    I also like your ideas…and the part about Reagan and the cold war, I would agree with you there, too.

    I was a cook in the army straight out of high school, not a grunt like you in Iraq, didn’t have to go to Vietnam, but I have very much respect for folks like you who might have had to take a bullet.

    The army would do Franklin a world of good…

  23. Thor says:

    Curmudgeon – Agree with you again. We’ve been directionless since we won the Cold War. I’m very curious what the next 20 years or so are going to have in store for us. A big war? (we talked about this last night a bit) or are we going to turn inward again like we did after WWI. . . . For the record I hope we turn inward but I don’t think that’s going to happen.

  24. kstills says:

    +1 for Curmudgeon.

  25. JustinTheSkeptic says:

    Ah! the good old Onion…talk about a liberal city, but sensible that is Madison, Wisconsin home of the Badgers. Who to blame for the crisis? Let’s make this simple: lack of any backbone in Washington – just say know to lobbyist.

  26. Marcus Aurelius says:

    Republican leadership (more accurately, right wing leadership) is all about representing business interests (not that the current Democratic political leadership is much better). Ours is a government ostensibly by and for the people. When big-money business interests are redefined as people (as happens under incorporation), and the government becomes “of” those interests and begins acting on their behalf (many times to the detriment of real, natural, people), shit goes haywire.

    For example, I offer the repeal of usury laws. How’s that “conservative,” pro-business, bullshit working out, people?

    It’s also interesting to note the period in which the US reached its highest point as a culture and form of government. It seems to have ended with Nixon, with the only bright point since being Clinton. The Republican era (right-wing, whack-job politics — focused on morality, jingoisms, and and other distractions) put us where we are.

  27. Marcus Aurelius says:

    The Curmudgeon:

    Anyone can have guns and butter — if they borrow enough for both. Republican administrations are profligate spenders and dishonest borrowers, and nothing more. The saddest part is, the bulk of what’s borrowed goes to their cronies. Not a damn bit of good done in the public interest.

  28. alfred e says:

    qualify “it”

  29. Brett Tibbitts says:

    Barry:

    You are losing your perspective due to your constant and unending effort to sell your book. You are making this all way too complicated. By doing so, you are hoping people will buy your book. [BR: The book is my perspective]

    The real estate bubble happened because Alan Greenspan held interest rates too low for too long – period- end of story – end of discussion. [BR: A gross over-simplification of the myriad factors that when into it]

    Alan Greenspan created free money that let the animal spirits loose in the country. Wall Street, mortgage brokers and banks went wild with all of the free money.

    If Alan Greenspan had not done this and had let the country suffer through the tech bubble and 9.11 without government interference, there would have been no real estate bubble.

    ~~~

    BR: I disagree with you, but if you don’t want to see anything about the book or bailout, you can adjust your dashboard settings to eliminate “Bailout Nation” as a category.

    So far, the emails in favor of more excerpts are 5 to1 positive (Do a chapter! wrote Cindi) If other people think I should not excerpt sections that are relevant to current affairs, please email to say so.

  30. franklin411 says:

    @Marcus
    I don’t buy TC’s idea that the Reagan borrowed to buy both guns and butter, winning the Cold War. For one thing, the US produced plenty of both from 1945-1980 without borrowing massive amounts of money. If all we needed to do was produce more color television sets than the Russians, then why didn’t we win the Cold War in 1959 when Vice President Richard Nixon pointed this fact to Soviet Premier Khrushchev in the Kitchen Debate?

    The borrowing was piled on from 1980 onward went to tax cuts for the rich, corporate welfare, and wars of choice–not to welfare, not to social spending, not to investing in the future.

    And why did the Cold War end? Simple. Because the Russians were too inflexible to adapt to changing conditions. Because enough time had passed that there were generations of Russians who hadn’t lived through WWI and WWII and consequently weren’t afraid of the West.

    Anyone who tells you that we won the Cold War because Communism couldn’t produce enough guns and butter needs to deal with China.

  31. tagyoureit says:

    @ alfred e 12:56

    Among other things Reagan inspired some awesome punk songs and bands. And for that I’m thankful!

  32. call me ahab says:

    Curnudgeon Says-

    “Borrowing to win WWII? Smart. Borrowing to win the Cold War? Smart. Borrowing to juice consumption? Stupid. And that’s what we’ve been doing.”

    well said- and that American’s don’t find this behavior from the USG demeaning to who we are- individuals and citizens of the US- amazes me-

    we are not livestock to be prodded and force fed at the feedlot

  33. call me ahab says:

    sorry curmudgeon- please forgive me for botching your name

  34. Moss says:

    All in the name of competition…, be careful of what you wish for.

  35. The Curmudgeon says:

    Thor…I’d be surprised if it were otherwise (no war). It will depend a great deal on the type of person that Obama is, and I’m not really sure of that now. It is my opinion that the most important job we elect a President for is Commander-in-Chief and as our foreign policy representative for the world. It is one area where there is great discretion on the part of the POTUS. Obama seems very level-headed, and not inclined to gin up a fight “just because” like the Bush boys did. But the pressure on him to do so can be great. Let’s hope he fights only when and if he has to…that’s why we call it the Department of DEFENSE.

    In any case, these are interesting times for these United States.

  36. Thor says:

    Whammer – Thanks for the link. I can believe that the president (any president) might think this, but Obama is not stupid enough to say it out loud.

  37. deadonarrival says:

    @Whammer

    Who believes anything that is said anymore? But here was the source:

    http://www.truthorfiction.com/rumors/o/obama-veteran-insurance.htm

  38. Thor says:

    Ahab said – American’s don’t find this behavior from the USG demeaning to who we are- individuals and citizens of the US- amazes me.

    Yes! I don’t know about you guys, but no one I know or work with is even remotely interested in what’s going on in the economy right now. It’s as if everyone panicked last year and now their attention has moved on to other things. I don’t know what that’s about, it is our short attention spans? Our inability to look at hard truth? Burying our heads in the sand? Whatever it is, it’s pretty scary.

  39. miker says:

    Anyone care to look back a little further to Milton Friedman and his beliefs in deregulation as outlined in his 1962 book Capitalism and Freedom, or his Free To Choose series? Reaganism wsa driven by Friedman.

    http://en.wikipedia.org/wiki/Milton_friedman
    “…1980, the ten-part series, entitled Free to Choose, aired on PBS. The companion book to the series (co-authored by Milton and his wife, Rose Friedman), also entitled Free to Choose, was the bestselling nonfiction book of 1980 and has since been translated into 14 foreign languages. Friedman served as an unofficial adviser to Ronald Reagan during his 1980 presidential campaign, and then served on the President’s Economic Policy Advisory Board for the rest of the Reagan Administration. In 1988, he received the National Medal of Science and Reagan honored him with the Presidential Medal of Freedom.”

    ~~~

    BR: It is too attenuated to say tis a proximate cause; I am looking for a direct causation, not a theoretical underpinning.

  40. The Curmudgeon says:

    Ahab…I can’t believe you would botch my name after I have promulgated and diligently protected the idea behind “Call me Ahab” :)

    No worry, though. I mispell it, too sometimes…

  41. call me ahab says:

    Curmudgeon-

    have to blame my poor typing skills- and no spell check feature at my office-

    keep the myth alive ;-)

  42. The Curmudgeon says:

    “Anyone who tells you that we won the Cold War because Communism couldn’t produce enough guns and butter needs to deal with China.”

    That’s hardly worth responding to, but I would point out that China didn’t produce much of either guns or butter until Mao’s death yielded economic reforms allowing for the private ownership of property and the rejection of exclusively state-owned and controlled means of production. China’s story is one of embracing a neo-capitalistic economy while clinging fast to its communist political ideology in name only, but conveniently keeping up its repressions of speech and assembly. The Chinese Communists made a deal with their people that they would allow them to get rich if they’d just stay in line and keep their mouths shut.

    And pray do tell, what “wars of choice” did Reagan initiate that weren’t also a part of the bigger conflict with the existential threat posed by the Soviet Union? Grenanda? Central America? Those were part of the bigger picture of the Cold War. And he left Beirut when he saw the folly of remaining there as sitting ducks.

    Clinton was similiarly loathe to choose conflict. He agreed to a very limited air war in Bosnia after much prodding by the Europeans, and wisely got us out of Somalia after its Beirut-like disaster.

    The Bush boys were the war mongers.

  43. Thor says:

    Curmudgeon says: The Chinese Communists made a deal with their people that they would allow them to get rich if they’d just stay in line and keep their mouths shut.

    True, but do you think they’ll be able to deliver? It’s one thing to bring 300 million people out of poverty, it’s quite another to bring 1.3 billion. I can’t see how China is going to be able to avoid their historical dilema – they open up for trade, the coast gets rich, and the inland stays dirt poor. That can’t work out for them long term, there aren’t enough physical resources on the planet to bring the majority of the Chinese people into the middle classes . . .

    Agree with you on the wars, especially with regard to the Middle East. I spent years studying middle eastern history and politics after 9/11 and the one thing I came away from that experience is that there is absolutely no way that America is going to resolve any of the issues in the region. We’re dealing with cultures that have deep hatred and distrust of both the west and each other going back thousands of years.

  44. b_thunder says:

    Gore would’ve had smaller deficits before the bubble had popped, but he sure as s**t he he would’ve supported the rise in home ownership even more than Bush did, and that includes turning the blind eye to everything up to and including the NINJA loans. I think he would’ve done more to prolong the bubble and delay the bust. Homeownership was and still is more Dems’ issue than the GOP’s. He probably would’ve had Summers at the Treasury for most of the time, and we can see how much Summers is eager to institute “real reforms.” The housing bubble probably would’ve grown even bigger under Gore.
    So, with smaller deficits the Gov’t under Gore would have had easier time printing the bailout cash, but the magnitude of the crash could’ve been much greater. Two things would cancel each other out.
    However, the rest of the country under Gore could’ve been better off (war money could’ve been spent domestically)

    ~~~

    BR: That’s the problem with thesde counter-factuals — its only a guess, you cannot really know!

  45. deadonarrival says:

    @Thor

    “there aren’t enough physical resources on the planet to bring the majority of the Chinese people into the middle classes . . .”

    Excellent point.

    It’s the main conundrum the world faces right now in terms of the notion of reflating the world economy. Especially, when one considers the idea of global warming.

  46. drey says:

    “I’m very curious what the next 20 years or so are going to have in store for us. A big war?”

    No, more like a long, protracted struggle against terror, radical Islam, domestic extremists, or whatever face the govt and MSM choose to put on it – think Oceana or Asiana or whoever the big, fearful enemy was made out to be at any given time in Orwell’s 1984. A fearful public is a public that can be manipulated – it’s sociology 101.

    I agree with Curmudgeon’s observations and believe personally that while GWB may be the worst president ever, Reagan is the most overrated with his irresponsible deficit spending (but we crushed the evil empire, right? Hooray for us) that set the tone for a generation or two of opportunistic politicians…

    Ironically, Reagan had it right IMHO when he said the only answer to overblown govt was to ‘starve the beast’. Too bad he didn’t follow his own playbook.

  47. Lord says:

    I agree it would have been much different under Gore. A constructive stimulus package would have passed in 2001 instead of the totally ineffective one that was passed. Gore wouldn’t have taken his prescriptions from Greenspan and regulators wouldn’t have stood in obeisance to the laissez faire policies encouraged. Greenspan would not have done everything possible to avoid a recession and would have been quicker to raise rates. There likely would have been a bubble similar to the late 70s and late 80s, but it would have been dealt with sooner and prevented from growing as large. We would still have had problems but they would have been recognized and attempts to remedy them would have been undertaken. It is hard to believe anything would have been as bad under W.

  48. franklin411 says:

    @Bill Fleckenstein
    Your post is interesting, but to me it reads as an exercise in contradiction. You assert that the crisis was caused by regulators–policemen, if you will–who failed to prevent bad/incompetent people from abusing the system for their own benefit (and to the detriment of us all).

    And yet you assert that deregulation is not to blame? How can you have regulatory police without regulations to be enforced? I agree that the police were asleep at the switch, and that we need more cops on the beat. However, it seems very clear that Reagan popularized and enshrined the notion that the more rules you throw out, the fewer policemen you need. And that’s what produced the crisis we’re in right now.

    Perhaps what you mean is that deregulation in and of itself can be OK if executed intelligently. IE, some regulations don’t make sense, and others make a ton of sense. The ones that don’t make sense should be thrown out, and the ones that do need to be rigorously enforced. That is my own construction, however, so some clarification might be useful.

  49. deadonarrival says:

    Looky here ladies & gentlemen.

    Franklin is trying to take down Bill Fleckenstein!

  50. alfred e says:

    @DOA 1:12: Thanks for the link to the truth. I’m not sure it’s any better, maybe worse. Kind of like “get someone else to pay for it, I wash my hands of our responsibility, I have other places I’d rather spend money.”

    And the logic is horrible. It spreads the cost across private health insurance subscribers, in addition to the cost of national health care. Another ponzi scheme.

  51. deadonarrival says:

    @alfred e

    I really don’t know if the link is the truth or not. It would appear to be official, but who knows? I agree with the other posters here that it seems mighty absurd that BO would say something like that.

    I don’t really know what’s true or what’s not true anymore these days.

  52. Moss says:

    Make the money changers compete for the FDIC insurance protection.
    Increase the reserve requirements of those that opt-in.

  53. Thor says:

    Drey – Ironically, Reagan had it right IMHO when he said the only answer to overblown govt was to ’starve the beast’. Too bad he didn’t follow his own playbook.

    Sure, this is what Reagan was hoping for, and a lot of fiscal conservatives really believe in. What we have seen now however, is that there is no way the beast is going to allow itself be starved, especially when one of the biggest part of that beast is ourselves by way of entitlements and tax cuts.

  54. The Curmudgeon says:

    @Thor

    re China’s chance at succeeding: It would be hard to imagine another society that so profligately consumes as ours, especially one of 1.3b. It would require massive amounts of resources.

    And China has a demographic disaster looming. It is rapidly aging as it gets richer, while it has a huge cohort of excess males coming of age and entering the work force (as I recall, roughly 60% of 18-25 year olds are male) due to its one-child policy (wide-spread late-term abortions and infanticide when the first/only child was female).

    What do you do with that many males without mates? Using them for empire building seems plausible, but the state painted itself into a corner with its policy: If everyone has only one child, very few would willingly give them up for the “higher” purpose of empire building.

    Life, though, has vastly improved for even the left-behind rural areas. It was only forty years ago that Mao’s Great Leap Forward starved to death some 40 million Chinese. Some leap.

  55. tawm says:

    Krugman’s NYT collumn was consistently a shrill diatribe against everything GWB did or advocated. Krugman is much more of a political commentator than a credible economist.
    It seems oversimplified to blame one President — “Bush” or “Reagan” or “Greenspan” — we have a complex government with multiple branched and players. Rather than focus on the WHO did WHAT, it’s important to focus on the specific policies, actions and their ramifications. Saying “deregulation” is bad is too simplistic.

  56. Thor says:

    Curmudeon -

    Very good points. I’ve always been wary of the “Rising China” crowd. To me it harks back to the Japan scare of the early 90′s. Just because China has been going gangbusters the last 20 years doesn’t mean their growth is going to continue unimpeded indefinitely. There are hundreds of variables that need to be considered when we try to look at the long term future of China. The could very well rise up to challenge us but I’ll believe that only when i see it.

    India is another one I don’t put too much hope in long term. Sure, they have a massive advantage in the IT fields because so many of them speak English (all coding worldwide is done in English). Their government is a mess though and if we add in global warming, specifically the shrinking of the worlds glaciers, they’re in a lot of trouble. I read somewhere that something like 35% of the population of India is dependent on glacial melt from the Himalayas as a source for water. Shrink that water supply down by an appreciable amount and I think India is in a lot of trouble.

  57. rww says:

    I think what bugs me about these who-to-blame questions is that they assume we should care that the banks blew up. I care only that the destruction wasn’t complete enough. I blame Obama for not finishing the job. The impact of the “credit crisis” on the real economy seems iffy. We’re screwed not because Greenspan, Bush et al allowed the banks to make stupid bets over the last 20 years but because during that time the whole establishment opted for globalization and the de-industrialization of America.

  58. Groty says:

    Thank you for that response, Bill Fleckenstein. You are 100% right in your analysis of the crisis and with regard to Krugman. He is only readable if you want to see a liberal solution to whatever problem he decides to discuss. He’s as objective as Sean Hannity and Rush Limbaugh are.

    Barry refuses to let go of the myth that deregulation caused the problem. Financial firms have more regulators up their backside than just about any other industry in the economy. Take Fannie and Freddie, for example. Not only are they subjected to Congressional oversight scrutiny, but they are regulated by a regulator whose sole purpose in life is to supervise and regulate those TWO entities. How’d that work out? Madoff is another example of regulatory failure. The SEC reviewed Madoff multiple times AFTER Markopolus gave them the details of the ponzi on a silver platter. My god, he gave them the details of exactly what was going on and they still failed to detect the biggest fraud in history.

    I’ve long said it was a failure of regulators to regulate, not a lack of regulation, that is one of the primary causes of the crisis. But the more important factor was the dereliction of duty of corporate boards. The failure of corporate governance is even more abhorrent than the regulatory failures. The boards actually created the incentives that encouraged the reckless risk-taking, while the regulators were simply inept schmucks with no backbone to reign in the reckless behavior.

    If the regulators and the boards had done their jobs, the world would be alot different today.

  59. donna says:

    Reagan started the financial decline of the United States, Bush finished it. Blaming Bush is silly, since any right-winger would have done the same.

    The entire right-wing policy of spending everything we have on the military while cutting government services elsewhere pretty much doomed us to failure. See “Rise and Fall of the Great Powers” — all empires end up overextending themselves into debt. Republicans followed the book perfectly.

  60. donna says:

    Oh, and for the record, yes Krugman is a liberal. He’s also usually correct. Reality has a liberal bias. ;^)

  61. call me ahab says:

    but Donna- I am pretty sure this country has more $$ as a percentage of taxes attached to entitlements such as SS and Medicare/Medicaid-

    can’t throw everthing at it just being the military or the republicans- a bit more nuanced than that I think-

    entiltements will have to be curtailed- such as higher age and means testing- so that SS and Medicare can survive-

    I’m with you on pointless foreign wars- as far as I’m concerned we should close down our global show of force around the world- but-

    there is more to it than just that

  62. Bruce in Tn says:

    Groty:

    I am inclined also to agree with your point about deregulation. In many ways deregulation is a good thing, the kicker in continuing to enforce the regulations that are needed.

    I think the fed is too deregulated, and we as voters and taxpayers don’t think out of the box about these big governmental institutions. How would I change things?

    Try this on..in the treatment of interest rates, the fed cannot move rates, say, below 3 per cent or above 7 per cent without a simple majority of congress. Any moves between 3 and 7 require no “oversight” by congress. This would eliminate future bonehead moves by bonehead Greenspans who have too much control over the FRB by strength of reputation or personality…Volcker might have had a little harder time deconstructing Burns, but I think this would be an improvement.

  63. neuroguy says:

    I think Dr. Krugman’s two articles aren’t being interpreted correctly. In his more recent article about W., I don’t think he is exonerating W. Obviously W’s (and his administration’s) complete favoritism to corporate executives and everything-goes style economic policy did a lot of damage. I think his main point in that article though, is that who’s to say Gore or Kerry would have pushed for anything much different, and if so, if the democrats would have backed any of it. Maybe things would have been watered down, a bit, but I can’t imagine any situation where major changes to say, derivatives trading, would have gone through when times seemed so great to so many people. Republican or democrat, the rule is: keep the constituents dancing when times are good, and when the bottom falls out, blame the other guy.

    As for the Reagan article, a think it is a much deeper look at what has gone on in this country. It’s tough to argue (honestly at least) that Reagan’s first term wasn’t truly the end of the ideals that pushed FDR’s New Deal policies (a focus on labor, unions, safety nets, the common good), and the beginning of our current environment of quick pay, opacity, and above all, break-away inequality. I guess a question to ask oneself (which may help explain Krugman’s articles), would we have been more likely to have skipped most of the current economic mess if Carter would have been reelected, or if Gore would have beaten out Bush? If I had a time machine, I would put my money on Carter, and I think that is what Krugman’s articles are all about.

  64. Joe Friday says:

    “I hold Bill Clinton much more responsible, for such foolish acts as the repeal of Glass Steagall and the passage of the Commodity Futures Modernization Act.”

    * The issue of market share may be debatable, but I’ve yet to see a satisfactory argument that the repeal of ‘Glass-Steagall’ had much of an impact on the current meltdown. Not to mention, who would have imagined that any subsequent administration, even a Republican administration, would have had all the federal regulatory agencies sit on their hands ?

    * The idea that Clinton is “responsible” for the ‘Commodity Futures Modernization Act’ is particularly silly:

    A) The derivatives markets were TINY prior to this decade, as illustrated by the following chart.

    http://www.iie.com/images/fig-posen-20090507-1.gif

    It would be unfair to apply current hindsight to the situation a decade ago.

    B) Late in 2000, the CFMA legislation was inserted into a more than 11,000 page omnibus budget bill on December 15th, that Clinton had to sign on December 21st, after Congress had already recessed for Christmas and one month before he was to leave office, to keep the federal government running.

    C) Even if he had vetoed the entire omnibus budget bill just to prevent the enactment of the CFMA, and risked being accused of shutting down the federal government by the very Republicans who had shut the federal government down twice previously, it would have been as easy as pie for the incoming Republican administration and Republican Congressional Majority to enact the very same legislation without much of a delay.

  65. 1) Actually CFMA was attached as a rider on Xmas eve, not 12/15.

    2) No hindsight necessary — the CFMA legislation treated derivatives uniquely versus all other financial instruments — no transparency, no exchange requirements, no counter-party disclosures, and most importnat of all, no reserve requirements.

    You didn’t need to be Nostradamus to see this was a very bad idea Numerous people — Frank Portnoy, Brooksley Born, warned this was a brewing disaster.

    That the incoming GOP would have signed it is no excuse . . .

    3) Glass Steagal’s repeal wasn’t a cause, but it made the net result much worse.

    The repeal of the post-depression era Glass Steagall laws, which separated the commercial (depository) banks from their riskier cousins, the investment bank wasn’t the cause of the crisis.

    But, it allowed FDIC insured depository banks to having a much greater involvement with Wall Street structured products. Had Glass Steagall not been repealed, then the larger banks would not have own iBanks, and would not have purchased all of the toxic paper they did.

    The repeal of Glass Steagall led directly to banks intimate involvement with structured products, excess exposure to derivatives, and damaged balance sheets.

  66. frodo1314 says:

    BR – Fair points all but let’s keep something in mind. There’s no guarantee that had W’s team (or a supposed Gore team – had Gore won in 2000) stepped up and taken action at those times or points you mentioned, that things wouldn’t have turned out even worse, right? I know that’s hard to imagine, but…we do seem to fall prey always to the unforseen circumstance, expecially when meddling with the economy, do we not?

  67. badtrader says:

    @rww
    I totally agree with your point about the de-industrialization of the US. Corporate America wanted to kill the unions and greatly lower its labor costs because, on a personal level, it would be wonderful for each of them (via higher pay, big jackpots if they owned stock). So they decided that they would send American manufacturing to, first Mexico, then China (because it was even cheaper than Mexico). Of course they were enabled to do this by the politicians they were paying for: mostly Republicans but with help from key Democrats like Clinton and the minority of Dems (including Nancy Pelosi) who joined almost all Republicans in voting for NAFTA.

    So China became a superpower because it was in the interests of the people that make up corporate America for them to become that. Also China’s rise gave rise to Walmart’s rise because Walmart would be the vehicle China would sell its goods to the people of the US. Walmart destroyed a lot of the economies in small towns because no longer did the money stay in the respective communities.

    Then speculation via stocks and housing replaced real income while more and more Americans used debt to replace what used to be income.

    The result is at this moment the US is a paper tiger with serious serious and massive problems (and if peak oil starts to play out like it appears to be doing, that’s gonna make things almost impossible to fix).

    As for Reagan, I’d put a lot of the blame on him. Reagan was the one that sold and legitimized the idea to the public via his friends in the MSM that government was bad (and thus regulation and rules were an bad and an interference).

    This was continued by GWB. If you want a good read of the criminality of the Bush-Cheney regime and what the disrespect they had for laws and regulations, pick up a copy of Free Money by David Cay Johnston to read about how the Bush – Cheney administration actively helped Enron massively ripoff the American people by refusing to crack down on Enron. Though Enron imploded through fraud, they had a real excellent business model: the license by the most powerful two peole in the world to massively ripoff millions of Americans each and every month via their utility bills. No wonder their stock price went so high, that’s a hell of an advantage to have.

    Donna I totally agree with you too.

  68. Cursive says:

    I don’t view Krugman as relavent. He’s a liberal hack, a liberal version of Don Luskin. He’s attacking Reagan over Bush II because the latter was more progressive than the former. As for the blame, we are all to blame. Any president, George Bush included, is very powerful; but, that power is delegated by the voters. We voters have elected a bunch a jackasses. Until we change that trend, we will have more of the same. It is useless to assign blame to one man.

  69. Joe Friday says:

    Barry,

    “Actually CFMA was attached as a rider on Xmas eve, not 12/15.”

    That would have be a nest trick, as the omnibus budget legislation, after being passed by the 106th Congress, was signed into law by President Clinton on December 21, 2000.

    If by “Xmas eve”, you obviously mean December 24th, the legislation had already become law three days earlier.

    “That the incoming GOP would have signed it is no excuse . . .”

    I didn’t intend the point as an excuse. It merely makes whatever you might have wished or wanted Clinton to have done MOOT. We’ll have to disagree about Glass-Steagall. I’m still not convinced.

    ~~~

    BR: I stand corrected (I overstated the case) The CFMA was attached not Christmas eve, but rather, on the eve of Christmas — just before Congress broke for the Christmas holiday. That does not change the fact is was passed essentially unread.

    As to Glass Steagall, my case has been made in 322 pages. If you believe that Glass Steagall had no impact, I say you have failed to make that case — indeed, you haven’t even tried.

    Sir, the burden of proof is on you to prove your theory that undoing the protective post Depression legislation at the behest of Citigroup had no impact on either Citi or the rest fo the finacial sector.

    Good luck!

  70. BR,

    @ 6:05 PM

    that’s nice, and all, if one is content– hacking at branches.

    why not expose the Root? you know, the one Created during another Christmas recess, now ~95 years ago, the FedRes ~?~

    simply, without it, it’s “Member Banks” wouldn’t have dared to lever up, in such a way, as to make Archimedes look like a 3 yr-old with his first set of Lincoln Logs..
    http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Archimedes

  71. Shadowfax says:

    I’m always amazed at how far back folks look to pin the blame, often based on their favorite ideology. In truth, we don’t have to go back far at all. Starting in 2004 and continuing to 2006, about 20% of mortgages originated were subprime, versus about 10% before and after that. What was the proximate event to this? The SEC decision to relax the net capital rule in early 2004. See the NYT article here:

    http://www.nytimes.com/2008/10/03/business/03sec.html

    The big five investment banks promptly levered up from 20:1 to about 30:1 leverage (debt to equity; higher if you use assets of course in the numerator). They had $4 trillion in liabilities when they went under; if you add another $5 billion for Fannie and Freddie, you have 7 bankrupt entities with $9 trillion in obligations. Yep, that is a crisis! All had embarrassingly small financial cushions and were essentially unregulated. As Krugman says, if it acts like a bank, regulate it like a bank.

    Credit crises are about excessive leverage and lending based on asset values (houses in this case) rather than ability to repay. My view is that leverage restrictions can prevent this from recurring. For homeowners, an ironclad requirement for 20% housing down payment and income / net worth verification. A house is not an entitlement. Second, 8% common stock ratio for banks, which rises with the size of the institution. There is no reason for one of the top 4 mega-banks to have common stock ratios of 3-4%. That is a ridiculously narrow cushion. These are the two fundamental controls the system did not have and must be put in. Most other rules under consideration are window dressing. Put these controls in and you don’t need a systemic risk regulator or bank Sarbox or Basel III.

    Long-Term Capital Management warned us in 1998 about the dangers growing in the highly-leveraged, derivative-bearing shadow banking sector, but we ignored it. That sector is now gone or going. Enron showed us the dangers of off-balance sheet financing and lending based on asset price rather than cash flow (loans to Enron were essentially secured with its stock, a real house of cards). Yet we let the big banks move over a $1 trillion off-balance sheet, a shoe that has yet to drop completely.

    In the short run, we should realize that about 1/3 of the lending mechanism in the U.S. is gone (securitization of anything other than conforming loans) and we really don’t want it back. So spending a trillion dollars and planning trillion dollar debt increases annually forever is just ridiculous.

    I would suggest that we all vote out any incumbent with over 8 years in the House or Senate in the next election and demand that Wall St. cease all lobbying activity until their common stock ratios are back to 8%.

  72. torrant says:

    Krugman blames the Garn-St. Germain Depository Institutions Act for leading to the current deregulation led crisis. He says Reagan signed the bill in 1982. Interestingly Krugman was working that very year for the Reagan administration as a staff member of the Council of Economic Advisors. I would love to know if he had an opinion about Garn – St. Germain at that time.

    Also, good ole Senator Churk Schumer was a co-sponsor of the bill. Seems that Schumer keeps turning up whenever we try to trace congressional roots of the cause of the current debacle. I wonder if Krugman has had a follow up conversation with his good buddy Schumer about that bill way back in 1982?

  73. BDW says:

    Clinton didn’t support the Gramm-leach-biley bill, but signed it to avoid the inevitable veto-override since it had passed 90-8 in the senate. Before conference, it had passed 54-44 (53 Rs, 1 D). This can’t be blamed on Clinton, and the reason Dems voted for it (though ultimately wrong to do so) was that it strengthened privacy and anti red-lining laws. I do agree that it should not have been done and has caused a solid amount of damage.

    (I had added the facts behind the Commodity Futures Modernization Act of 2000, but it’s been covered. The problem with reading a bit then commenting w/out fully reading the thread ;))

    ~~~

    BR: How does that rationalize his signing it? If you don’t believe in it, you veto it.

  74. Joe Friday says:

    Barry,

    “I stand corrected (I overstated the case) The CFMA was attached not Christmas eve, but rather, on the eve of Christmas – just before Congress broke for the Christmas holiday. That does not change the fact is was passed essentially unread.”

    The fact that it does not change is that if Clinton had vetoed the bill, and been slimed by the American RightWing for allegedly shutting down the federal government and leaving office with the federal government without a budget, it would have all been moot, as the incoming Republican administration and Republican Congressional Majority could have simply past the CFMA without delay.

    “As to Glass Steagall, my case has been made in 322 pages. If you believe that Glass Steagall had no impact, I say you have failed to make that case – indeed, you haven’t even tried.”

    “Sir, the burden of proof is on you to prove your theory that undoing the protective post Depression legislation at the behest of Citigroup had no impact on either Citi or the rest fo the finacial sector.”

    Eh, what “case”, what “theory” ?

    I merely posted that I had “yet to see a satisfactory argument”. I would be more than happy to defend any affirmative theory I present, if I had indeed presented one.

  75. That “you have not seen a satisfactory argument” speaks not to the truth of the matter, but to your own lack of reading on the subject. Your limited research is not dispositive here.

    More to the point, if you believe my position, as as laid out in the book, is false or incorrect, than disprove it and spare us the rhetorical nonsense.

    It was quite clear from the context of your prior comments — and your steadfast defense of Clinton for signing both GBL and CFMA bills — that you do not want to believe the repeal of Glass Steagall to be significant.

    Have the courage of your convictions — either show that the Glass Steagall repeal was not significant, and that its perfectly okay to combine insured depository banks and riskier investment banks.