John McCain is calling for a “9/11 Commission”-style probe of the financial crisis to find out what caused it, although he has already decided the blame resides with “the old-boy network and the corruption in Washington.” Meanwhile, his running mate Sarah Palin said “We are going to reform the way Wall Street does business and stop multi-million dollar payouts and golden parachutes to CEOs who break the public trust.”
Although the commission idea has a certain amount of retro charm, I don’t believe the causes of the financial crisis are any big mystery. And the “multi-million dollar payouts and golden parachutes to CEOs who break the public trust” are just a symptom of the disease, not the disease itself.
One factor the wingnuts cannot truthfully blame on the financial mess — which of course doesn’t mean they won’t do it — is excessive government regulation. The nondepository institutions like Lehman Brothers that are collapsing right now got government off their backs several years ago. In fact, that’s when the trouble started.
There’s a good background article by David Lightman at McClatchy Newspapers that explains what happened, and I urge you to read it all. In a nutshell, what happened was the Reagan Revolution and the fantasy that markets and securities can regulate themselves without government oversight.
This isn’t just a problem with “Wall Street.” The entire financial system is breaking down. Further, the rolling disaster we’re seeing now could not have happened had some critical New Deal regulatory programs been left in place. For example, Lightman explains how dismantling the 1933 Glass-Steagall Act led directly to what’s happening on Wall Street.
Lightman also says that President Clinton signed the Glass-Steagall “reform” into law, which is true. But the driving force behind getting rid of Glass-Steagall was then-Senator Phil Gramm, who is now Senator John McCain’s economic adviser and a co-chair of his presidential campaign.
The talk is that if McCain is elected, Gramm would be first in line to be treasury secretary.
The free market true believers remain in denial of what’s actually happening, which tells me they will not learn from experience, and there’s no point pretending they will. Our only recourse is to be sure they aren’t the ones making real policy.
Sasha Abramsky on McCain’s pathetic attempt to capture the Reagan magic.
“In Candidates, 2 Approaches to Wall Street” reveals McCain’s bottomless hypocrisy.
“On Wall St. as on Main St., a Problem of Denial.” Or, why smart executives make stupid choices.