I am opposed to all forms of control. I am for an absolute laissez-faire, free, unregulated economy. Let me put it briefly - I am for the separation of state and economics ~ Ayn Rand (2/2/1905 to 3/6/1982) a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels and for developing a philosophical system she called Objectivism.
Ayn Rand became a stabilizing force in my life. It hadn't taken long for us to have a meeting of the minds - mostly my mind meeting hers ~ Alan Greenspan (DOB 3/6/1926) an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006, quoted from his autobiography, "The Age of Turbulence"
Everyone knows that the recent financial meltdown, which began in 2008, came about as the result of another housing bubble. But what caused this bubble? And whom can we blame? Did McCain lose the election simply due to the fact that the Republicans were in charge at the time? That, plus the fact that he looked incredibly foolish when he suspended his campaign to rush back to Washington to fix the mess, stopping first to be interviewed by Wolf Blitzer in his "Situation Room", and snubbing David Letterman in the process?
Fortunately the American public correctly assigned blame for the financial crisis to John McCain, the Republican Party and deregulation. In the days immediately following McCain suspending his campaign, visiting Wolf's situation room, and apologizing to David Letterman because he "screwed up", McCain was asked (in a "CBS Today" interview) if he regretted championing deregulation in 1999. McCain replied, "I think the deregulation was probably helpful to the growth of our economy" (a definite "no").
And this occurred only shortly after McCain was forced to fire his financial advisor, Phil Gramm, who called the recession "mental", and declared that "America is a nation of whiners". Unsurprisingly, McCain lost the election.
The deregulation McCain championed in 1999, along with his financial advisor Phil Gramm, was the Financial Services Modernization Act of 1999 (also known as the Gramm-Leach-Bliley Act). It repealed part of the Glass-Steagall Act of 1933, which "prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and/or an insurance company". In other words, retail banks and investment banks were required to remain separate entities, so as to discourage speculation (which can also be described as gambling).
Freed from these prohibitions, investment banks purchased retail banks, bundled their customer's mortgages and resold them as "mortgage backed securities". But because the banksters made their money upfront they didn't really care if the mortgage holders defaulted. Certainly there was a strong incentive from them not to care, as their profit margin would be negatively impacted if they did. Naturally this led to a bubble (and bubbles eventually burst). But for the time being there was loads of cash to be made.
Gramm, Leach, and Bliley were Republicans. Conservative economic philosophy calls for deregulation. Ayn Rand believed in it, and so did her acolyte Alan Greenspan, who began his tenure with the Federal Reserve in 1987 when he was appointed its chairman by President Ronald Reagan. Reagan, the President who declared, "Government is not the solution to our problem, government is the problem" (sounds anti-regulation to me).
It is the Democratic Party that is supposed to champion protection of the consumer through strict regulation, yet they got snookered by the Ayn Rand laissez-faire fairy tale! Greenspan kept his Fed chair position for the next 18 years, whether the President was a Republican or a Democrat. According to the Frontline special, The Warning, "by the time Bill Clinton took the White House, the anti-government rhetoric had become so fashionable that even some Democrats embraced it".
In addition to not firing Greenspan as he should have, Clinton brought on board ex-Goldman Sachs employee Robert Rubin to head up the Treasury department. Greenspan and Rubin, along with advisors Lawrence Summers and Timothy Geithner formed a "pro-business anti-regulation support group". The 2/15/1999 edition of Time Magazine dubbed Greenspan, Rubin and Summers, "The Committee to Save the World". I think a more apt honorific would have been "The three horsemen of the coming financial apocalypse".
And so, President Clinton, following the Randian advice of his free market advisors, signed a bill sponsored by three Republicans and championed by a future Republican Presidential contender. That was after Gramm-Leach-Bliley passed the Senate with 53 Republican "yeas", one Democratic "yea", and 44 Democratic "nays" (there was also one "present" and one "absent", but those were Repubicans).
Update 9/26/2014: The vote I reference above was NOT the final vote. After conferencing with the House the bill came up for a vote again and this time it passed with 38 Democratic "yea" votes and only 7 Democratic "nay votes... unfortunately. Also, I've known about this post being wrong for quite some time and did nothing about it.
That is something that I ALWAYS try to avoid (wrong information being presented here). But this was back during my early days of blogging. I think that currently I am doing a much better job in making sure no erroneous information slips through. I apologize for taking so long to correct this post.
Correctly voting "nay" on this terrible piece of legislation in the Senate were Democrats Barbara Boxer (CA 1993-present), Richard Bryan (NV 1989-2001), Byron Dorgan (ND 1992-2011), Russell Feingold (WI 1993-2011), Tom Harkin (IA 1985-present), Barbara Mikulski (MD 1987-present), Paul Wellstone (MN), and Republican Richard Shelby (AL 1987-present).
| Final Vote Tallies on S. 900, 106th Congress: Gramm-Leach-Bliley Act (On the Conference Report) 11/4/1999. (Yea/Nay/Not Voting or Present)... Senate Vote #354: Republicans (52/1/2), Democrats (38/7/0). House Vote #570: Republicans (207/5/11), Democrats (154/51/4). |
Greenspan was on Meet the Press with the same bullshit. Romney was along with him. Neither said anything fresh or new. In fact, Romney offered absolutly nothing. Greenspan said Congress should not repeal a law from 1978.
ReplyDeleteThere is so much that is erroneous in your essay it's hard to know where to begin. Greenspan disassociated himself from being an Objectivist and opted for the power and fame associated with becoming chairman of the Fed. That was his choice and it displayed his hypocrisy.
ReplyDeleteAs far as what actually started the housing bubble you have to go to the actual beginnings which started under Carter and accelerated under Clinton & Bush, to-wit: the coersion by the government to force mortgage lenders to make subpar loans to satisfy groups like ACORN. Instead of originating loans with honest underwriting (creditworthyness, a real job, etc.), loans were forced for political reasons & the situation grew worse when FNMA & FDMC were told to buy these loans. It was a government created crisis which led to wild real estate speculation and mortgage-backed securities. None of this would have happened in a true laissez-faire capitalism scenario where politics and politicians are separated from the economy (as with church & state). You need to examine the "basics" behind the problem! Government regulation started the ball rolling and it continued until the inevitable happened...a burst of the bubble created by "progressive" politicians and the idiocacy of having a phony secondary market (FNMA & FDMC) and a corrupt, unconstitutional private institution called the Federal Reserve to create money out of thin air.
Without government regulation the gap between rich and poor would be even wider.
ReplyDeleteThink about workplace safety standards that would not exist had it not been for government regulation. Think of how low wages would be had it not been for government recognizing the right to organize and form labor unions.
You're profile pic doesn't show you to be a man of considerable wealth and leisure rtay. What you have you owe to responsible government regulation and people that truly care about this Country.
Thanks for stopping by rtaylortitle -- and taking the time to compose a reply. That said, I of course disagree with everything you've written, and find your entire theory of what caused the housing bubble to be erroneous.
ReplyDeleteYes, Objectivists have disassociated themselves from Greenspan, but Greenspan has never "disassociated" himself from Objectivism. ACORN has ZERO ability to influence or coerce the government to "force" mortgage lenders to make "subpar loans" (aside from the fact that there is no such thing as a "subpar" loan).
The housing bubble was caused by greed and a LACK of regulation. If the US had instituted true laissez-faire economic policies the outcome would have been a collapse of the financial sector and a depression. Conservative politicians following a Randian free market philosophy are to blame, not progressives. Progressives believe in regulation -– because regulation would have prevented the crisis from occurring.
All the myths that rtaylortitle repeated are debunked here:
Community Reinvestment Act: The Facts
This article points out that "the CRA requires banks to lend to working-class families and people of color, but only when those people have been deemed credit-worthy". And that a bank's "CRA-compliance rating" was based on whether or not they maintained "safe and sound banking practices".
In other words, rtaylortitle's claim that loans were "forced for political reasons" (by progressives) is completely and utterly false.
I am going to have to agree with rtaylortitle here. Greenspan quoted Rand early in his career, but soon subscribed to a Keynesian view after taking over the Chair for the Fed. If you want the real culprit in most of our woes, follow the money. It is always the Federal Reserve that is screwing things up.
ReplyDeleteI find it humorous that you mention Tim Geithner as an advisor to your "three horsemen of the coming financial apocalypse." Thank you for that little tidbit of information.
A good apraisal of the situation can be found here: http://www.backwoodshome.com/articles2/silveira115lw.html
It echos a lot of the same things that rtaylortitle was saying in his reply. The publication is not a conservative rag by any means, it could be categorized as libertarian/survivalism.
The entire premise of what you are dealing with on you blog is somewhat skewed. Neo-con type Republicans are just as progressive as you and the modern liberal democrats. Both parties are just arguing over how to use governmental power. It is all progressive.
Greenspan became fed chairman on 8/11/1987. He left the position on 1/31/2006 after serving for 19 years. But it wasn't until almost 3 years after stepping down that he said...
ReplyDelete"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief". (Greenspan Concedes Error on Regulation by Edmund L. Andrews, The New York Times 10/23/2008)
The point of opening my post with the Rand and Greenspan quotes was to illustrate that Greenspan believed in Rand's anti-regulation stance. He believed it the ENTIRE TIME he held the position of fed chairman.
As for your second point, that use of government power by Neocons or Liberal Democrats can both be termed "progressive"... sorry, but this is utter nonsense.
From Wikipedia: Progressivism is a political and social term for ideologies and movements favoring or advocating changes or reform, usually in an egalitarian direction for economic policies (public management) and liberal direction for social policies. Progressivism is often viewed in opposition to conservative ideologies.
FYI the "con" in Neocon stands for conservatism. Neocons and Progressives are on OPPOSITE ends of the political spectrum.
The article you linked to states... "The seeds of the meltdown and bailout were planted with the Community Reinvestment Act (CRA) of 1977, passed into law under Jimmy Carter".
No, this is wrong... as I pointed out to rtaylortitle. Please see my previous post for the reasons why.
The Community Reinvestment Act played no part in the financial meltdown. It's a myth which exemplifies the blame-the-victim class warfare that Conservatives love to engage in.
I do thank you for your reply though. Thank you for stopping by.
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ReplyDeleteCheers, Catch You Later