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Democrats Share The Blame

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January 21 brought us Episode 199 of HBO’s Real Time with Bill Maher.  At the end of the program, Bill went through his popular “New Rules” segment.  On this occasion, he wound it up with a rant about how the Republicans were exclusively at fault for the financial crisis.  Aside from the fact that this claim was historically inaccurate, it was not at all fair to David Stockman (a guest on that night’s show) who had to sit through Maher’s diatribe without an opportunity to point out the errors.  (On the other hand, I was fine with watching Stephen Moore twist in the wind as Maher went through that tirade.)

That incident underscored the obvious need for Bill Maher to invite William Black as a guest on the show in order to clarify this issue.  Prior to that episode, Black had written an essay, which appeared on The Big Picture website.  Although the theme of that piece was to debunk the “mantra of the Republican Party” that “regulation is a job killer”, Black emphasized that Democrats had a role in “deregulation, desupervision, and de facto decriminalization (the three ‘des’)” which created the “criminogenic environment” precipitating the financial crisis:

The Great Recession was triggered by the collapse of the real estate bubble epidemic of mortgage fraud by lenders that hyper-inflated that bubble.  That epidemic could not have happened without the appointment of anti-regulators to key leadership positions.  The epidemic of mortgage fraud was centered on loans that the lending industry (behind closed doors) referred to as “liar’s” loans — so any regulatory leader who was not an anti-regulatory ideologue would (as we did in the early 1990s during the first wave of liar’s loans in California) have ordered banks not to make these pervasively fraudulent loans.

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From roughly 1999 to the present, three administrations have displayed hostility to vigorous regulation and have appointed regulatory leaders largely on the basis of their opposition to vigorous regulation.  When these administrations occasionally blundered and appointed, or inherited, regulatory leaders that believed in regulating, the administration attacked the regulators.  In the financial regulatory sphere, recent examples include Arthur Levitt and William Donaldson (SEC), Brooksley Born (CFTC), and Sheila Bair (FDIC).

Similarly, the bankers used Congress to extort the Financial Accounting Standards Board (FASB) into trashing the accounting rules so that the banks no longer had to recognize their losses.  The twin purposes of that bit of successful thuggery were to evade the mandate of the Prompt Corrective Action (PCA) law and to allow banks to pretend that they were solvent and profitable so that they could continue to pay enormous bonuses to their senior officials based on the fictional “income” and “net worth” produced by the scam accounting.  (Not recognizing one’s losses increases dollar-for-dollar reported, but fictional, net worth and gross income.)

When members of Congress (mostly Democrats) sought to intimidate us into not taking enforcement actions against the fraudulent S&Ls we blew the whistle.

President Obama’s January 18 opinion piece for The Wall Street Journal prompted a retort from Bill Black.  The President announced that he had signed an executive order requiring “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive”.  Obama’s focus on “regulations that stifle job creation” seemed to exemplify what Black had just discussed one day earlier.  Accordingly, Bill Black wrote an essay for The Huffington Post on January 19, which began this way:

I get President Obama’s “regulatory review” plan, I really do.  His game plan is a straight steal from President Clinton’s strategy after the Republican’s 1994 congressional triumph. Clinton’s strategy was to steal the Republican Party’s play book.  I know that Clinton’s strategy was considered brilliant politics (particularly by the Clintonites), but the Republican financial playbook produces recurrent, intensifying fraud epidemics and financial crises.  Rubin and Summers were Clinton’s offensive coordinators.  They planned and implemented the Republican game plan on finance.  Rubin and Summers were good choices for this role because they were, and remain, reflexively anti-regulatory.  They led the deregulation and attack on supervision that began to create the criminogenic environment that produced the financial crisis.

Bill Clinton’s role in facilitating the financial crisis would have surely become an issue in the 2008 Presidential election campaign, had Hillary Clinton been the Democratic nominee.  Instead, the Democrats got behind a “Trojan horse” candidate, disguised in the trappings of  “Change” who, once elected, re-installed the very people who implemented the crucial deregulatory changes which caused the financial crisis.  Bill Black provided this explanation:

The zeal, crude threats, and arrogance they displayed in leading the attacks on SEC Chair Levitt and CFTC Chair Born’s efforts to adopt regulations that would have reduced the risks of fraud and financial crises were exceptional.  Just one problem — they were wrong and Levitt and Born were right.  Rubin and Summers weren’t slightly wrong; they put us on the path to the Great Recession.  Obama knows that Clinton’s brilliant political strategy, stealing the Republican play book, was a disaster for the nation, but he has picked politics over substance.

*   *   *

Obama’s proposal and the accompanying OMB releases do not mention the word or the concept of fraud.  Despite an “epidemic” of fraud led by the bank CEOs (which caused the greatest crisis of his life), Obama cannot bring itself to use the “f” word. The administration wants the banks’ senior officers to fund its reelection campaign.  I’ve never raised political contributions, but I’m certain that pointing out that a large number of senior bank officers were frauds would make fundraising from them awkward.

Black targeted Obama’s lame gesture toward acknowledgement of some need for regulation, encapsulated in the statement that “(w)here necessary, we won’t shy away from addressing obvious gaps …”:

Huh?  The vital task is to find the non-obvious gaps.  Why, two years into his presidency, has the administration failed to address “obvious gaps”?  The administration does not need Republican approval to fill obvious gaps in regulation.  Even when Obama finds “obvious gaps” in regulatory protection he does not promise to act.  He will act only “where necessary.”  We know that Summers, Rubin, and Geithner rarely believe that financial regulation is “necessary.”  Even if Obama decides it is “necessary” to act he only promises to “address” “obvious gaps” — not “end” or “fill” them.

At the conclusion of his Huffington Post essay, Black provided his own list of  “obvious gaps” described as the “Dirty Dozen”  —  “. . .  obvious gaps in financial regulation which have persisted and grown during this, Obama’s first two years in office.”

Bill Black is just one of many commentators to annotate the complicity of Democrats in causing the financial crisis.  Beyond that, Black has illustrated how President Obama has preserved – and possibly enhanced — the “criminogenic” milieu which could bring about another financial crisis.

The first step toward implementing “bipartisan solutions” to our nation’s ills should involve acknowledging the extent to which the fault for those problems is bipartisan.


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Palin Comparison

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September 1, 2008

In a perfect world, there would be a floor fight to take Sarah Palin off the ticket at the Republican Convention. It would make for some good TV this week.  On the Friday, August 29 program, Real Time with Bill Maher (HBO), National Public Radio’s Michel Martin made the strident claim that those who criticize Sarah Palin “do so at their peril”.  Sarah Palin is a Gumball.   There.  I will say it again, as well.  Although I would agree that anyone who resorts to sexist criticism of Palin does so at their own peril, there is plenty of room for reasoned dismay at McCain’s choice.  Meanwhile, Michel Martin’s claim that Palin’s experience is analogous to Tim Kaine’s experience, should have been made at Martin’s peril.  Actually, it was.  Tim Kaine is the Governor of a state that just happens to be next door to our nation’s Capitol.  Virginia’s population is 7,702,091 people.  The population of Alaska is less than one tenth of that at 683,478.  Although Kaine’s time served as Governor of Virginia is equivalent to the time served by Palin as Governor of Alaska, Kaine previously served four years as Lieutenant Governor of Virginia  — a job with similar day-to-day duties as those of the Vice-President of the United States.  You see, both the Lieutenant Governor and the Vice-President preside over a body called “the Senate”. The Lieutenant Governor presides over the State Senate and the Vice-President presides over the United States Senate.  The Gumball made the mistake of asking the question, into a TV camera, of what the everyday duties of the Vice-President might be.  Tim Kane learned the answer by presiding over the Virginia Senate for four years.  In case The Gumball doesn’t know (and she doesn’t, by her own admission) Kane’s duties as Lieutenant Governor matched those of the Vice President of the United States.  Michel Martin must be aware of this … she just might not want anyone else to be so aware.  Before Tim Kaine was Lieutenant Governor of Virginia, he was the Mayor of Richmond Virginia for four years.  Two years ago, The Gumball was the mayor of her home town:  Wasilla, Alaska (population 9,000).  Tim Kaine was the mayor of a city with a population over twenty times the size of Wasilla, Alaska, at 200,123 people.  Tim Kaine went to law school (Georgetown).  The Gumball didn’t, nor did John McCain.

The stupidity of this episode is “off the charts”.  On the heels of an outrageously successful Democratic Convention, McCain has made a desperate reach for those disgruntled supporters of Hillary Clinton.  At the same time, with his choice of The Gumball, McCain has sold out to the televangelist lobby in the hope of connecting with that ever-elusive Republican “base”.  The term “desperate” has been used by many commentators.  Jonathan Alter of Newsweek was kind enough to analogize the selection of Palin to a “Hail Mary” or “Hail Sarah” pass at the end of a close football game.  McCain’s media sycophants claim that McCain’s selection of Palin as his running mate, reinforces his “maverick” persona.  To the contrary, if McCain really were a maverick, he would be standing up to the televangelist lobby, rather than sucking up to it, as he is with this choice.

Sarah Palin (a/k/a “The Gumball”) is a “wing nut” who wants creationism to be taught in public schools and who refuses to believe that global warming has been caused by human activity.  To her credit, Palin went to term with a baby known to have Down Syndrome, based on her anti-abortion stance.  Her ability to do the anti-abortion walk as well as the anti-abortion talk will give her some degree of “street cred” with a limited population.

Nevertheless, with his choice of Palin, McCain has alienated his own “base” – the independents, moderate Republicans and centrists who believed that once elected President, McCain would tear off the rubber mask and return to his old self.  As Arianna Huffington said a while ago:  “The John McCain of 2000 is not a candidate in this election.”  McCain’s choice of The Gumball just drove that message home.

The fact that The Gumball was not adequately vetted, has become glaringly obvious to many Republicans.  She hasn’t been Governor of Alaska for two years and yet, she is already in trouble there. A special prosecutor has been appointed to investigate her activity.  She has been accused of “abuse of power”.  Our current Vice-President has that as his middle name.  This situation should make life easy for those writing the negative ads about the Republican ticket.

As long as Michel Martin has directed our attention to Tim Kaine, let’s remember where he was born:  a city named St. Paul, Minnesota.  If you want to find out what life is like there now, with the Republican Convention taking place, read Lindsay Beyerstein’s article, “Inside an RNC Raid” at Firedoglake.com.  It will make you sick, with reports of warrantless searches at homes — even one owned by a former military police officer.  When a woman staying at the house discussed in the story asked for a warrant, she was detained.  Local police were blended with apparent “contractors” or private Gestapo-for-hire.  Of course, this is all completely illegal in the United States where we have lived for all our lives.  Those in control of the 2008 Republican Party don’t care about the rule of law.  They make a point of promoting “leaders” who know nothing about it, either.  The reasons for this are obvious.