To some audiences McCain has claimed to have made an effort to strengthen the regualtion of the financial industry. This is disingenuous, as he and his party are four square behind removing constraints on the financial community and the business world in general. I have discussed his meager gestures toward regulating business. His overwhelming record in favor of deregulation is much discussed elsewhere. It is hard to imagine a record more clearly favoring abolishing regulatory constraints. Here is a video compilation of a few recent deregulation statements by McCain and speakers at the Republican convention.
When McCain was saying that there was no problem with the financial industry, he really meant it. His blinders were so effective that he published this piece after the market went haywire this month. On the second page he actually recommends his insurance deregulation plan based on the successful deregulation of the banking industry. I hope that his published enthusiasms do not track his stock selection decisions.
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.
It was reported that nationally new home starts in August were at a 17 1/2 year low. The housing industry sector of the economy is in its worst slump since the Great Depression. By absolutely every credible account this is due to a failure of regulation in the financial industry, the same cause as the Great Depression.
Just as the new breed of Republicans wants to roll back the social safety nets of the New Deal, they also want to unfetter all of industry from regulation. This is why Bush appointed deregulation champions and incompetents to head federal agencies. Having failed to learn from the past we were doomed to repeat it. Once again the failure of regulation has led to economic crisis.
The loudest and most ardent — if not the rational — voice for deregulation in Washington is the Republican attack dog BIAW, which constantly shrieks about getting the government off its back. The BIAW complains bitterly about environmentalists who are likened to Nazis. Officials of local governments, who enforce building codes fare no better in their eyes. Evidence of the benefits to society from growth planning, safety standards and environmental regulation are dismissed as the toxic propaganda of evil doers.
The strength of this ideological fervor is such that it overrides even concern for the interests of the BIAW’s constituency, the building industry in Washington. It is the absence of meaningful regulation — a condition insisted upon by the BIAW and the Republican Party — that created the disastrous economic conditions that are ruining so many construction-related businesses in Washington.
Time and again we learn that unchecked greed is not a functional foundation for an enduring society. Certainly there can be over-regulation but that is not a justification for the utter abandonment of regulatory constraints on society-threatening institutional avarice.
Our society in its blind fervor to reduce government to a military subsidization function, has failed over the last several years in two respects relevant to this topic: First, our tax money, instead of being used for generally recognized governmental purposes is being used to subsidize huge corporations, the profit going to investors and executives, and losses to the government; Second, under slogans promoting self reliance we have repeatedly in the last several years spectacularly depleted retirement funds and the savings of individuals, undermining the end sought to be achieved.