[Posted by Karl]
The Washington Post claims:
A decade ago, Sen. John McCain embraced legislation to broadly deregulate the banking and insurance industries, helping to sweep aside a thicket of rules established over decades in favor of a less restricted financial marketplace that proponents said would result in greater economic growth.
Now, as the Bush administration scrambles to prevent the collapse of the American International Group (AIG), the nation’s largest insurance company, and stabilize a tumultuous Wall Street, the Republican presidential nominee is scrambling to recast himself as a champion of regulation to end “reckless conduct, corruption and unbridled greed” on Wall Street.
That is a selective rendering of history, to say the least. McCain did not even vote on the final version of the Financial Services Modernization Act in 1999. He did vote for the original Senate bill, which Pres. Bill Clinton threatened to veto in no small part because the original Senate Bill “would dilute requirements that banks make loans to minorities, farmers and others who have had little access to credit.” In contrast, Sen. Joe Biden voted against the original Senate bill but voted for the final version — presumably in part because it kept open the pipeline for those riskier loans.
Moreover, in 2005, McCain was pushing the Federal Housing Enterprise Regulatory Reform Act to rein in Fannie Mae and Freddie Mac and require more stringent regulation by the Department of Housing and Urban Development, by which time Barack Obama — who did nothing — was on his way to becoming a top recipient of of donations from Fannie Mae, Freddie Mac and Wall Street firms enmeshed in the sub-prime mortgage mess. (Indeed, the biggest chunk of industry donations to Camp Obama comes from the Finance, Insurance & Real Estate (FIRE) sector — just edging out Lawyers & Lobbyists.) So McCain did not suddenly embrace this issue; if anyone has, it is Obama, who is grasping for an issue to regain the lead in the public opinion polls with less than 50 days until the election.
The disingenuous WaPo hit piece furthers Obama’s attempt to make the current Wall Street turmoil a partisan issue, though as Megan McArdle points out, the Democratic talking points in this regard are “supertwaddle.” She also delivers a gentle smackdown to both her deranged colleague Andrew Sullivan and Obama over the notion that either Clinton or Bush could have done much to head off the current situation. Both of those McCardle posts should be must-reads, as they also largely debunk the notion that the Financial Services Modernization Act is a major factor.
I would be both more charitable and less charitable to the Clinton and Bush Administrations than McArdle in certain respects. As the Village Voice recently noted:
Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.
Moreover, the Voice piece points out that Fannie and Freddie fueled the private market for these practices as well (as did cheap money, from here and abroad). To be fair, many of the Cuomo impulses were amplified by HUD during the Bush years, though only after the Bush Administration proposed what the New York Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis,” only to see it fail in the face of bipartisan opposition.
Those who attempt to make the current troubles on Wall Street a GOP scandal or comment on Bush Administration policy have to contend with the reality that the FSMA passed the Senate by a 90-8 vote and passed the House by a vote of 362-57, with support from Harry Reid, Joe Biden, Nancy Pelosi, Steny Hoyer, etc. Conversely, efforts to reform Fannie and Freddie withered in the face of bipartisan opposition.
Nor are Barack Obama’s hands clean on the issue. In addition to the tens of millions in donations taken from the FIRE sector, Obama’s national finance chair was an owner and board chair of Superior Bank of Chicago, which pioneered sub-prime lending, developing the financial instruments that helped set the stage for the current sub-prime meltdown. His campaign fundraising bundlers include: Louis Susman, Michael Froman and J. Michael Schell of Citigroup; Steve Koch of Credit Suisse; Bruce Hayman, David Heller, Eric Schwartz, and Todd Williams of Goldman Sachs; Mark Gilbert, Christine Forester, John Rhea, Nadja Fidelia, and Theodore Janulis of Lehman; and Robert Wolf of UBS Americas. Such bundlers help make up a more loosely defined “national finance committee,” whose members are are made to feel part of its inner workings through weekly conference calls and quarterly meetings, advance copies of his speeches, access to his top advisers, opportunities to influence the campaign’s message, and so on. During the primaries, Obama’s proposals were more industry friendly than either Hillary Clinton or John Edwards. And Camp Obama has been seeking advice on mortgage and housing policy from no less than disgraced former Fannie Mae CEO Franklin Delano Raines.
Thus, Obama’s desperate attempt to make a bipartisan problem into a partisan issue goes beyond dishonest into the hypocritical, as is the WaPo’s bizarre attempt to portray McCain as the opportunist — though neither is as bizarre as Biden trying to blame it on the Bush tax cuts.