It is generally acknowledged that the lack of effective regulation of our financial intuitions, and the blind eye that the Bush administration turned to the excesses and wanton profiteering of that economic sector, were primary causes of the recent near meltdown. We are suffering the greatest financial crisis since 1929 when we were last dramatically reminded of the need for regulating this area.
The Great Depression marked the end of a Republican epoch in which the party had dominated the office of the presidency since before the turn of the century. In the 1920’s Republican presidents Harding, Coolidge and Hoover had famously kept the the government out of the way of business and enjoyed the benefits of an economic boom based on speculation in financial markets. The Great Depression called for the need for reforms and the institution of regulations to curb the profligacy that inevitably attends opportunity.
The Democratic Party was voted in to rein in the excesses of Wall Street and to protect the everyday person who suffered the consequences of its reckless profiteering. A system of safeguards and oversight was created to assure that such catastrophe would not happen again.
In the 50 year period that followed the two Republican presidents that were elected safeguarded and contributed to the post depression-era safeguards. Eisenhower did battle to check the Pentagon’s insatiable need for money and Nixon created the Environmental Protection Agency among other things.
In 1980 the pendulum began to swing back, as it has throughout our history. (Arthur M. Schlesinger wrote a great book about this called “The Cycles of American History.” These cycles usually last about 30 or 40 years, or so.)
The current frenzy to deregulate dates back to the Nixon years, where talk began, although on a limited scale. Carter was a proponent of deregulating or loosening the regulation of a few industries, but Reagan made it an ideological theme. In order to do this he needed plausible support from the people whom the regulation was ultimately intended to protect. He used a variety of bumper sticker type slogans like “getting the government off our backs.” He created theatrical hypothetical villains and was celebrated for titling his lance at these windmills. He mixed this in with cutting taxes to create enough populist appeal to undertake the removal of many restrictions imposed by government. Thomas Frank explored this phenomenon in more recent years in a book called “What’s the Matter with Kansas.”
Bill Clinton carried the lust for deregulation where Reagan dared not tread. Reagan did not think that he had the political currency to attack the whole welfare system. Clinton, as a Democrat, was able to do this. Banks and investment firms had been separated since the Great Depression but Clinton oversaw the revocation of this section of the Glass Steagall Act in 1999 with his signing of the Gramm-Leach-Bliley Financial Services Modernization Act. (That is the same Gramm who is McCain’s chief economic adviser.)
Reagan began the wholesale changes in the media. After several other tinkerings in 1987 Reagan abolished the Fairness Doctrine which had been a cornerstone of media regulation. It required media to air both sides of an issue if they presented one view. It was this that legalized, if you will, the Rush Limbaugh phenomenon. The Democrats were caught by surprise while right wing people raced to fill the media with their views.
It was Clinton’s signing of the Telecommunications Act on 1996 that really fueled this radicalization of the air waves by opening the doors to the monopolization of media outlets by a very few corporations. Clear Chanel began gobbling up radio stations and broadening Rush Limbaugh’s reach. Published or transmitted opinion became servant to the interests of fewer and fewer companies.
Historians will devote much attention to the similarities between the Bush administration and those of Harding, Coolidge and Hoover in the 1920’s. There was the same disregard for the oversight function of government and the same obeisance to business interests. For this crisis to occur all we needed was a captain asleep at the wheel during the late stages of the deregulation frenzy.