Let’s give credit where credit is due. This time credit goes to Pres. Obama’s opponent in the 2008 election, Sen. John McCain, as well as to Sen. Maria Cantwell, a liberal Democrat from Washington. These two unlikely allies are co-sponsoring a bill that would restore the Glass-Steagall Act (aka the Banking Act of 1933). If McCain and Cantwell are successful, their efforts would make giant banking institutions choose between being commercial banks or investment banks. The Glass-Steagall Act imposed an absolute firewall between the two types of banking, until it was repealed in 1999 by the Gramm-Leach-Bliley Act. It was the 1999 action, signed into law by Pres. Clinton, that allowed banks to throw reason to the wind and sell incredibly risky bundles of bad loans as investments. In other words, it was one of the sparks that lit the fire that nearly burned down the world economy late last year.
McCain and Cantwell’s efforts are paralleled in the House of Representatives, where several lawmakers have introduced similar legislation. The House Majority Leader, Steny Hoyer (D-Mary.), supports the efforts to bring back Glass-Steagall. Hoyer recently told Bloomberg News, “As someone who voted to repeal Glass-Steagall, maybe that was a mistake.” Yeah, no kidding, dude. Hopefully, his efforts, and those of McCain and Cantwell, will find favor in Congress.
This article appears in Dec 15-21, 2009.
oh, really? i just can’t believe it.
Frank, it’s amazing that you know everything about everything. NOT! No one who’s Ben paying attention is going to take your crazy ass opinions for anything other than that. LR
This is funny because McCain wanted it repealed back then and pushed hard for the repeal. It’s amazing the lack of education in basic economics DC has.
The repeal of Glass-Steagall WAS one of the major factors in the housing bubble.
— Federal Reserve
— Fannie and Freddie
— Mortgage backed securities
The fed’s printing press combined with the investment houses being able to operate as banks and sell mortgage backed securities because of the repeal was probably the MAJOR factor in the bubble.
So unless they’re willing to reign in the Fed & gov’t spending in general this is a good idea.
Well Frank it actually goes hand in hand. You seem to like to exclusively blame Dems and borrowers. Unfortunately that isnt the case here. It’s too bad you’re stuck in that partisan abyss hahah.
They cant make you borrow but they can make policies that definitely push you to get loans.
Tax breaks for 1st time homebuyers
Tax credits for interest paid on mortgages
No taxes on first $250k in gains on personal residences
Fannie and Freddie are subsidized with US tax dollars — taken by force.
Federal Reserve prints funny money, then you are forced to use that money. They also kept interest rates at near 0% — below inflation — so saving money was no longer as prudent.
So if you want to pay less in taxes, you become a borrower here in the US.
So combine all of that with banks willing to lend to anyone with a name — voila!
Most people borrow. Most also listen to the president. W. Bush repeatedly stressed folks to buy buy buy after 9/11.
Borrowers — 33%
GOP/Dems — 33%
US financial system — 34%
Blaming the borrowers exclusively is kinda like saying, too many people want to be lawyers!! Or there’s too many lawyers.
Well there are so many stupid laws and bureaucracies, there’s a demand for lawyers. Thats why people become lawyers.
Tax policy
Monetary policy
created the phony demand for loans and homes and fed on the inflated supply until the bubble broke.
I do also blame the borrowers. But, they only react to gov’t policy.
Fannie mae for example, started by FDR’s New Deal.
Pushed to make low-income loans in the late 70’s – Carter thru the 90’s with Clinton.
But, the explosion started with Bush and the GOP controlled congress.
Welfare for downpayments — American Dream Downpayment Act, Single Family House Affordability Act, increasing funding for welfare programs to build homes (all part of Bush’s belief that people have a right to own a home).
Under Bush, with the congress’ blessing — Greenspan dropped rates to record lows –drowning banks in cheap money, they also became eager to lend. Bush then increases the ability of Fannie and freddie to buy mortgage securities.
It’s unfortunate you refuse to look at gov’t policy. The GOP and Dems equally greased the skids in this mess. You should look at history and read up on economics.
So now we have the bubble, eventually it would deflate.
When the housing prices quit rising and start dropping, then the borrowers start defaulting in record numbers. See CA, NV and FL.
Its a well known phenomena:
http://www.bos.frb.org/economic/wp/wp2007/wp0715.pdf
you wrote:
When crack cocain was cheap, was that a valid excuse for getting out of trouble. It was so cheap and such a bargin there was no excuse not to buy IT!
— again you miss the point. Look at gov’t policy. It’s one thing to make a drug cheap. It’s another to make it cheap AND make it illegal to buy, sell and use it. That will eventually create a black market, drive up prices, long drug convictions, broken families, encouraging violence — oh wait, isnt that the essence of the drug war? A private vice became a public scourge.
Gov’t policy once again…
Thomas Woods has a great book on this economic bomb in Meltdown, you should look it up and read it.
Borrowers defaulting on mortgages is nothing new. It’s when gov’t policy spreads it and makes it permeate the entire economy — thats the problem.
Frank, you remind me of me about 6 years ago. I was also a GOP guy exclusively blaming Dems and seeing the GOP as the party always trying to do good. Sometimes posting these things makes me feel like I’m arguing with myself. It took me a long time to realize that gov’t makes things worse than they have to be.
I’m so glad I now see the light.. hahaha.
Thanks once again for reducing the comments section to a debate between two variants of right wing extremist thought.