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  • Morning Bell: Deregulation Didn't Do It

    Listening to politicians on the left speak about the current financial turmoil, one gets the impression that when President Bush took office in 2001 there was a perfect financial regulatory system in place. Only since then, they claim, has it been systemically destroyed by the Bush administration. Speaker Nancy Pelosi (D-CA) says, “the Bush Administration’s eight long years of failed deregulation policies have resulted in our nation’s largest bailout ever, leaving the American taxpayers on the hook potentially for billions of dollars.” Barack Obama echoed this sentiment in the final presidential debate when he said, “the biggest problem in this whole process was the deregulation of the financial system.” There’s just one problem with this analysis. There has been no deregulation of the financial sector during the Bush administration.

    In fact, the largest legislative action in financial services during the Bush years was the Sarbanes-Oxley Act, which increased regulation and drove capital markets overseas. Furthermore, according to data from the Government Accountability Office, of the 23 major regulatory actions (defined as an economic effect of $100 million or more) taken by the Securities and Exchange Commission since Bush took office, only eight lessened regulatory burdens. Compare that to President Bill Clinton’s second term, which lessened burdens in almost half of rulemaking proceedings. But maybe the problem wasn’t bad regulations, but bad regulators. Maybe the Bush administration weakened financial regulators? This isn’t true either. The SEC’s budget jumped from $357 million in 2000 to a whopping $629 million in 2008.

    Another favorite target of the left has been the Gramm-Leach-Bliley Act, which ended the Depression-era prohibition on banks engaging in the securities business. Clinton was the one who signed this law, so we will let him defend it:

    I don’t see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn’t signed that bill.

    All of this is not to say our current regulatory framework is perfect. Far from it. There are far too many different regulatory agencies trying to regulate the same activities. We need regulatory cuts and consolidation. Unfortunately, Congress cannot be trusted to come up with solutions. Senate Banking Chairman Chris Dodd (D-CT) is the biggest recipient of campaign cash from Fannie Mae and Freddie Mac. House Banking Chairman Barney Frank (D-MA) said this about Fannie and Freddie in 2003: “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis.” These two men epitomize why only 12% of Americans approve of the job Congress is doing. The American people deserve an independent commission to explain what caused the financial meltdown and recommend reforms to keep it from happening again. Heritage president Ed Feulner writes:

    A recent Rasmussen poll found that 59 percent of Americans agree with Ronald Reagan’s statement that “Government is not the solution to our problem; government is the problem.” A fair and complete investigation seems likely to confirm that wisdom by revealing that many of today’s problems were triggered by our elected officials — not by a failure of the free market. It’s time for some real oversight of our congressional overseers.

    Quick Hits:

    • A group of atheists in London raised $113,000 they plan to spend on 30 buses carrying this message: “There’s probably no God. Now stop worrying and enjoy your life.”
    • According to Rasmussen Reports, 58% of U.S. voters say more tax cuts will better stimulate the economy than new government spending.
    • Sarah Palin is talking to the national press corps more often than Joe Biden, reports CBS News.
    • Under Barack Obama’s tax plan, 49% of Americans who are eligible to vote will pay no income taxes, the Tax Policy Center has concluded.
    • Western donors have promised to spend about $4.5 billion to rebuild Georgia, whose economy and infrastructure were badly damaged by this summer’s war with Russia.
    Posted in Ongoing Priorities [slideshow_deploy]

    9 Responses to Morning Bell: Deregulation Didn't Do It

    1. Judith Knight Hutton says:

      Why in the world are people blaming the Bush administration while along the democrates have controlled the house and the senate? When are these guys going to be held accountable and how come so many people are ignorant about this issue? You would think they would want to have the dem's heads but no let's blame Bush. Unbelieveable. Our country appears to be on drugs or something because everthing that makes sense does not. Also I think all Americans that are exercising there right to vote should take a test on how their government works. Heck, the people coming to America and who apply for citizenship know more about America and our government then we do. I am moving to Australia. (sp?)

    2. Charles Calmbacher, says:

      Have all Americans forgotten their Civics, Government, and Social Studies classes? Why don't people realize that the President does not have the authority or ability to MAKE the laws that affect our economy? The President executes (read "enforces or implements") the laws passed by Congress. Our current economic problems are a result of the laws passed by the Democratically controlled Congress. The Republicans, Conservatives, and Libertarians need to remind the American people of this fact. At worst, it will make people think. At best, it will get the Democrats voted out of positions of power. Likely, it will get the Democrats to change their tune.

      If the American people insist on holding on to their ignorance, they will continue to get bad government and policies that will impoverish them.

    3. J. Powell says:

      The Dems best defence is 'Blame Bush.' We will be hearing this for years to come. The Dems are not going to accept blame for anything negative and they are not hampered by the truth.

    4. Ken Jarvis says:

      The HF continues to spread BS.

      Ronald Reagan’s statement that “Government is not the solution to our problem; government is the problem.”

      GOVT IS NOT THE PROBLEM.

      "today’s problems were triggered by our elected officials —

      not by a failure of the free market."

      WE HAVEN'T HAD A FREE MARKET FOR YEARS.

      THE USA IS NOW SOCIALISTIC

      LVKen7@Gmail.com

    5. Michael J O'Bri says:

      Spot on Heritage with your reporting and assessment. Hypothetical deregulation had whatsoever no contribution or cause and effect on the current credit crisis. Four main factors were the underlying root underpinnings of this problem.

      Number 1 is the fear and pressure that ACORN and programs such as Community Reinvestment Act placed upon banks to lower credit underwriting standards [ basic standard for debt to income ratio front / back 28/36] so home mortgages that were once not under writable became under writable as sub prime loans to mainly minority neighborhoods. Banks and financial institutions were told to lend, lend, and lend. Back in the 60s and 70s banks were accused of a practice called red lining were they would not lend in certain minority neighborhoods [areas on local maps had red lines drawn around city bounder / areas, hence red lining]. Court cases and pressure from Washington and the sprit of being a good community neighbor changed all that.

      Number 2 are the tax laws changes by a democratic congress in 1986 that encouraged removing equity from homes. Previous to the 1986 tax law change, automobiles and credit card loan interests were tax deductible. After becoming non deductible, home owners became aware of HELs [home equity loans] and HELOCs [home equity lines of credit] that are tax deductible, hence the popularity of leveraging out equity to purchase automobiles and other expensive toys. Hence in a red hot housing market where values were quickly rising these debt instruments became a useful tool to achieve the good life. With the easing of credit under writing standards vis a vis the above, money flowed.

      Number 3 is the fact that there was an ample supply of cheap money. This is acceptable and not dangerous in normal economic times. The reason for the cheap money was two fold: first the U.S economy suffered a direct hit on 9/11 and the FED, the keeper of the economy, reduced overnight rates to a growth mode. Secondly, the economic engine of China and China’s ability to purchase treasuries en masse, hence money and investing flowed to the U.S. Thus money was available and with weakened mortgage under writing standards, pressure from ACORN and CRA programs, mortgage money flowed, especially to sub prime folks that had poor to terrible credit worthiness.

      Number 4 and the Ground Zero of Blame; Washington D.C and the influence of Freddie and Fannie Mae. Freddie and Fannie became the secondary market for mortgage loans, HELs and HELOCs, and over 44% of these mortgage loans were sub prime. These two GSEs were the principal market for sub prime loans and were in fact UNREGULATED. So here is the de regulation that Obama and the socialist left refers. Senators Chuck Hagel and John McCain jointly sponsored a “Regulatory Overhaul Bill’ that was vehemently opposed by Fannie and Freddie Mae, and 100 % of democrats. Fannie and Freddie hired the Republican Lobbyist firm DCI, which was successful in killing all support for the bill, the cost $2,000,000. Republicans believed that Fannie and Freddie were becoming too large, and contained too many HIGH RISK loans, and they were right. Democrats led by Senator Dodd and Representative Frank believed that the overhaul would limit mortgage loans to the poor. Senator Dodd received a special loan from Countrywide, yet did not know it was a special loan,hence his knowledge of mortgage loan markets. Barney Frank, another financial wizard, lived with Herb Moses, Assistant Director of Fannie’s product initiative for affordable housing. No conflict of interest here as Frank was voting on measures that directly affected Fannie.

      Heritage is completely correct. Having a democratic Congress investigate the root cause and effect of the housing problem will result in the indictment of the entire Republican Party. Each and every American should contact the White House and demand an independent outside investigation. The Department of Justice should also be involved and this all should take place before the next President is sworn into office. The American people deserve answers, the world deserves answers.

    6. Alma says:

      I do not believe that Barack Obama is the answer to our problems; in fact I believe that he will cause more problems than he will solve. He is inexperienced and unproven. What I have learned about him, I do not like. I belive that in these times when we are being watched by the world, we need John McCain to watch our backs. As for Sara not being experienced…..hello….show me what experience Barack Obama has. We need John McCain to lead this great county and not some one with pretty word and no substance.

    7. Edwin Buck, Albuquer says:

      Hasn't anyone ever called on their congress men or women and told them to stop bribing us with our money to buy our votes? Probably not. I know that I have, and all I get from my politician is "gafflebarb". They are bending over backwards, trying to explain why it was necessary for them to bribe us, with our money, to get our votes. they have trully turned our country into a "banana republic". These people are in office to enrich themselves, their family and their cronies. And, they are using our tax money to do it.

    8. Spiritof76, New Hamp says:

      To Edwin Buck's question about people contacting their representatives in Congress, I am sorry to say that I have. What I get back is a letter put together probably by an "outstanding" graduate of our government school, that does not address what I write about. I find this to be not an isolated case. I have concluded that my representative doesn't care but can state proudly a 100% response statistic at re-election time.

      With regards to the financial mess created by the Congress, there will not be any investigation, handcuffing of the culprits or resignations. Those people in Congress are power-drunk to feel any responsibility or shame. Since they have already violated our Constitution left and right in the last 70 years, I would like to see a citizens' court assembled and charge the Congress with specific names and crimes. We must voice through that court that the responsible Congressmen and Senators be held in contempt. It may not achieve the desired result but at least it will focus our collective anger on them and draw attention to the problem.

    9. afeul NorCal says:

      Our country is in dire straights. All politicians have sold us out and will always cover their collective backs when they are found out, it is part of their world and to be a member this is the price they pay. Time is on their side.

      Reagan was the last president to stick to his guns about the government being the problem and not the solution, I'm not saying he was perfect.

      Until we get back to our roots as a nation this insanity will continue.

      With a Dem majority across the board the real truth about this collapse will be swept under the rug, Bush will take the heat (until real history books are written) and the MSM has moved on to some other Repub/Conservative they can blame.

      Who couldn't see it coming. My neighbors and I talked about the incredible housing price inflation and wondered aloud how can this be sustained, who is going to pay for this when it crashes. We all knew it was coming. When I ask a new home buyer what they paid or details about their loans and they told me I just shook my head and wondered how or why they would do this to themselves and what lending agency in their right mind would make these loans.

      The fat is now gone, the real problems of our life styles, greed and denial have caught up to us and are visible, they have been there all along but just out of view. As usual our politicians and institutions have failed us and still don't get the message.

      I can now clearly see that the ingrained bureacracy is running the show, they appear to be left leaning socialist types that are doing what they want while the pols play the game.

      Wake Up America, I hope its not too late.

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