ELECTION 2008:

Accusations fly: ‘Irresponsible’ history; ‘prescription’ for escalation

Thursday, Sept. 18, 2008 | 2:01 a.m.

Washington — As Republican presidential nominee John McCain refines his responses to the worst financial market meltdown since the Great Depression, Senate Majority Leader Harry Reid has been providing another story line -- one that blames McCain for the problems.

CHRIS MORRIS AND ALEX RICHARDS / LAS VEGAS SUN

Sen. Harry Reid

“The financial turmoil we’re now seeing is a direct outcome of the irresponsible Bush-Cheney approach to governing, which, by the way, John McCain has supported every step of the way,” Reid said on the Senate floor Wednesday.

The Nevada Democrat had begun his assault earlier in the week, comparing McCain to Herbert Hoover, the Depression-era president who famously failed to see the economic disaster ahead. McCain gave Reid the opening by maintaining that the fundamentals of the economy were strong even as the storied Lehman Brothers investment house disappeared before the nation’s eyes and the stock market was taking its biggest plunge since the 9/11 attacks.

Reid has leveled particular scorn at former Sen. Phil Gramm of Texas, who served as McCain’s campaign co-chairman in July in the face of criticism after dismissing emerging economic troubles as a “mental recession” and calling Americans a nation of whiners. Gramm is now an unofficial adviser to McCain.

Democrats, including presidential candidate Barack Obama, are taking aim at Gramm for orchestrating passage in 1999 of a vast financial industry modernization bill that knocked down market protections in place since the Great Depression.

Critics blame that bill for the today’s financial breakdown.

“Just look to the man John McCain hired to tell him what to say on his economy,” Reid said Wednesday. “The last person I want whispering in the ear of the next president of the United States is the chief architect, the No. 1 cheerleader for the elimination of responsible oversight.”

Reid suggested that the Bush administration Justice Department had been lax in prosecuting potential criminal violations in the markets, saying the department “has not touched these conspiracies, economic conspiracies, going on. They’ve ignored it.”

The White House, for its part, has repeatedly pointed the finger at Congress, saying lawmakers were slow to act on administrative proposals to fix mortgage giants Fannie Mae and Freddie Mac or modernize the Federal Housing Administration, until it passed legislation when the crisis intensified this year.

White House spokeswoman Dana Perino on Wednesday again said the Hill shares the blame.

“For critics who are suggesting, or trying to affix blame to the administration, I would ask them to go back and do a little bit of self-examination before they start addressing us,” Perino said.

“I would ask, you know, what specific regulation, could they name one, that we sought to weaken when it came to regulating these financial markets? I don’t think that they could.”

The financial overhaul that Gramm pressed in the Senate and President Clinton signed greatly modified laws that have been in place since 1933, when the country was in the throes of the Depression.

That year, Congress passed the Glass-Steagall Act, which essentially established a wall between banks and securities companies to prevent conflicts that could arise if banks were in the underwriting business.

Financial interests sought for years to chip away at the act and succeeded when Congress passed the Gramm-Leach-Bliley Act in 1999. It essentially wiped out the recession-era law and allowed the financial conglomerates of today to operate with far less government oversight.

In the book “Chain of Blame — How Wall Street Caused the Mortgage and Credit Crisis,” co-author Paul Muolo describes how, during the go-go real estate boom of the past several years, underwriters worked in “factory”-like settings, approving one home loan an hour, for contractors hired by Wall Street companies.

“This is where the rubber met the road and if no one’s paying attention that’s when you get in trouble,” Muolo said during a talk this week in Washington. “Now we’re in trouble,” he said.

“If Glass-Steagall was never torn down, we’d never have this problem.”

Bill Riggs, a spokesman for the Republican National Committee, notes that Reid, too, voted for the Gramm bill.

Reid’s record shows he initially voted against it before ultimately voting in favor after changes were made to restrict discriminatory red-lining, he said Wednesday.

Riggs said, “Americans are calling for bipartisan leadership on the economy, but Harry Reid and Barack Obama are responding with partisan attacks, dismissive mockery, and economic conspiracy theories.”

Discussion: 5 comments so far…

By JustTheFactsJack

9/18/08 at 11:51 a.m.

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It worries me that China quite possible will controll the entire financial system in the US and the UK.

This is a portion of an article from the BBC News Business website. A link to the entire article is at the bottom.

From the article:

The credit crunch is creating a new world order in banking and finance.

It's striking terror into the hearts of hedge funds, who can see their backers head for the hills at the mere sniff of an investment boo-boo by hedge-fund managers.

Conservative institutions, and those with simpler business models and a history of careful management of their funding sources, are the new superpowers.

It's a world in which Bank of America, JP Morgan, HSBC, Santander and even Lloyds TSB have the whip hand.

It's a world in which the Chinese state, if it co-ordinated the investments of its cash-rich institutions, could end up owning more-or-less the entire financial system of the US and the UK.

And it's a world in which even Morgan and Goldman may well have to surrender their proud independence.

http://www.bbc.co.uk/blogs/thereporters/...
By UNLVStud

9/18/08 at 1:41 p.m.

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Does placing the blame on someone really help the situation?

I'd rather know what our leaders are going to do now to fix the situation. The Bush/McSame plan can't be to bail out these corporations. They should fail if they really believe in free markets. Let them go into bankruptcy and be sold off piece by piece. The fat cats on wall street with their multi-million undeserved salaries should be bailing out their companies with their own cash, not the hard working American people.
By Gordon

9/18/08 at 8:39 p.m.

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I've seen a lot of misinformation concerning the 1999 legislation. The 1999 legislation (Gramm-Leach-Bliley Financial Services Modernization Act) allowed banks to merge and sell a basket of financial products within the same company. This was done for America's financial industry to stay competitive with the rest of the industrialized world which already allowed this.

The legislation that deregulated banking was the Commodity Futures Modernization Act of 2000. This is the legislation that included the 'Enron Loophole' and banned regulation of credit default swaps.

"It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead--even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.
It's not exactly like Gramm hid his handiwork--far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the SEC nor the Commodity Futures Trading Commission (CFTC) got into the business of regulating newfangled financial products called swaps--and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."
Read entire article here : http://www.motherjones.com/news/feature/...

This is the same legislation Senator Reid was referring to when he said "It was Phil Gramm who pushed legislation through a Republican Senate that allowed firms such as Enron to avoid regulation and destroy the life savings of its employees, and it was Phil Gramm's legislation that now has (allowed) Wall Street traders to bid up the price of oil, leaving us to pay the bill," quote taken from here: http://www.reuters.com/article/topNews/i...
By Kaz

9/19/08 at 7:34 a.m.

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Obama will *LOWER* your federal income tax - not increase it. That is unless you earn more than $250,000 a year. Obama will increase the tax of one earning $2M (2 million dollars) a year by $701,855 (11.5% increase). He will decrease the tax of one earning $20,000 a year by $892 (3.6% cut). Yes, he is increasing the tax on the rich by 11.5% and decreasing the tax on the low income by 3.6%.

McCain's tax cut for one earning over $2M (2 million dollars) in one year is $269,364 (4%). His cut for one earning $20,000 in a year is a only $113.00 (.5%). Yes, he is giving the rich a bigger tax break than the low income - 8 times bigger!!!!.

FACT: If you earn less than $250,000 a year, Obama will ***LOWER*** your federal income tax - not increase it.

FACT: Your Obama tax cut will be larger than your McCain tax cut.

FACT: McCain gives a multi-millionaire a tax cut that is ***8 times bigger*** than a low income earners tax cut.

See for yourself. Here is proof!!!!!!

Here is a link to a ***tax calculator*** you can use to see how much of a tax break you will get with Obama's plan. (I haven't been able to find one yet for the McCain plan. Why is that????.)
http://alchemytoday.com/obamataxcut/

Here is a link to a very clear tax cut comparison chart. This chart is referenced in many newspapers and magazine articles.
http://www.washingtonpost.com/wp-dyn/con...

Here is the link to get the full 56-page comparison of the two tax plans published by the independent Tax Policy Center.
http://www.taxpolicycenter.org/publicati...