[Rhodes22-list] Bill v Barack

[Brad Haslett]

Well, the old expression, "politics makes strange bedfellows" is
certainly true.  I never thought the day would come after so many
years of personal animosity, and political dislike for William
Jefferson Clinton that I'd find myself in agreement with about half of
what he says. Even more shocking is that I would ever consider voting
for his wife for President.  Times change (and don't anyone make some
snarky comment about growing-up).

Here's Bubba on de-regulation from today's WSJ.

Brad

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    * OCTOBER 1, 2008

Bill v. Barack on Banks
Clinton instructs Obama on finance and Phil Gramm.



A running cliché of the political left and the press corps these days
is that our current financial problems all flow from Congress's 1999
decision to repeal the Glass-Steagall Act of 1933 that separated
commercial and investment banking. Barack Obama has been selling this
line every day. Bill Clinton signed that "deregulation" bill into law,
and he knows better.


In BusinessWeek.com, Maria Bartiromo reports that she asked the former
President last week whether he regretted signing that legislation. Mr.
Clinton's reply: "No, because it wasn't a complete deregulation at
all. We still have heavy regulations and insurance on bank deposits,
requirements on banks for capital and for disclosure. I thought at the
time that it might lead to more stable investments and a reduced
pressure on Wall Street to produce quarterly profits that were always
bigger than the previous quarter.

"But I have really thought about this a lot. 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."

One of the writers of that legislation was then-Senator Phil Gramm,
who is now advising John McCain, and who Mr. Obama described last week
as "the architect in the United States Senate of the deregulatory
steps that helped cause this mess." Ms. Bartiromo asked Mr. Clinton if
he felt Mr. Gramm had sold him "a bill of goods"?

Mr. Clinton: "Not on this bill I don't think he did. You know, Phil
Gramm and I disagreed on a lot of things, but he can't possibly be
wrong about everything. On the Glass-Steagall thing, like I said, if
you could demonstrate to me that it was a mistake, I'd be glad to look
at the evidence.

"But I can't blame [the Republicans]. This wasn't something they
forced me into. I really believed that given the level of oversight of
banks and their ability to have more patient capital, if you made it
possible for [commercial banks] to go into the investment banking
business as Continental European investment banks could always do,
that it might give us a more stable source of long-term investment."

We agree that Mr. Clinton isn't wrong about everything. The
Gramm-Leach-Bliley Act passed the Senate on a 90-8 vote, including 38
Democrats and such notable Obama supporters as Chuck Schumer, John
Kerry, Chris Dodd, John Edwards, Dick Durbin, Tom Daschle -- oh, and
Joe Biden. Mr. Schumer was especially fulsome in his endorsement.

As for the sins of "deregulation" more broadly, this is a political
fairy tale. The least regulated of our financial institutions -- hedge
funds -- have posed the least systemic risks in the current panic. The
big investment banks that got into the most trouble could have made
the same mortgage investments before 1999 as they did afterwards. One
of their problems was that Lehman Brothers and Bear Stearns weren't
diversified enough. They prospered for years through direct lending
and high leverage via the likes of asset-backed securities without
accepting commercial deposits. But when the panic hit, this meant they
lacked an adequate capital cushion to absorb losses.

Meanwhile, commercial banks that had heavier capital requirements were
struggling to compete with the Wall Street giants throughout the
1990s. Some of the deposit-taking banks that were allowed to diversify
after 1999, such as J.P. Morgan and Bank of America, are now in a
stronger position to withstand the current turmoil. They have been
able to help stabilize the financial system through acquisitions of
Bear Stearns, Washington Mutual, Merrill Lynch and Countrywide
Financial.

Mr. Obama's "deregulation" trope may be good politics, but it's bad
history and is dangerous if he really believes it. The U.S. is going
to need a stable, innovative financial system after this panic ends,
and we won't get that if Mr. Obama and his media chorus think the
answer is to return to Depression-era rules amid global financial
competition. Perhaps the Senator should ask the former President for a
briefing.

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