Editorials
Bill Clinton shares blame in our current financial mess
President Obama has been free with his criticism of the “former administration (read George Bush Jr.)” and its role in creating the different crises he has found himself facing. But word now comes courtesy of David Weidner of “MarketWatch” that Mr. Bush may not have been the prime mover after all, at least regarding the financial meltdown of recent months.
That honor, Weidner maintains, may in fact go to former Pres. Bill Clinton.
Not that he acted alone, of course. In American politics it takes two to tango and in this dance a complicit, if not cajoling Republican Congress, gets its share of the blame as well.
According to Weidner the mistakes Clinton made were three-fold. First, in 1997, the amount of taxes homeowners had to pay of the sale of homes was changed and that made buying and selling them a matter of “rampant speculation.”
Second, Clinton refused to take action even though a triumvirate of heavy weights consisting of the Federal Reserve chairman, the Securities and Exchange Commission chairman, and his own Treasury secretary advised him to tighten regulation on derivatives and rein in those markets.
Weidner says these two errors pale in comparison to the granddaddy of all, i.e., repealing the Glass-Steagall Act of 1933 that kept entities like Citicorp and Travelers Group from merging, as they did in 1998, thereby creating a financial organization “too big to fail.”
Again, Clinton didn’t act alone. Weidner blames Fed Chairman Greenspan with giving bad advice in regard to interest rates, home ownership and derivatives. He also blames Pres. Bush for making buying a home easier by “removing the last vestiges of capital requirements at U.S. brokerage firms.”
But ultimately, the wall of separation between brokers and banks came tumbling down under Mr. Clinton.
In a September 30, 1999 New York Times story, Steven Holmes writes, “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”
Do the words “subprime mortgages” ring a bell? They started on Bill Clinton’s watch.
Our new president would do well to take these facts into consideration before laying everything he faces today at the feet of the “previous administration,” unless by that he means more than that of George Bush.
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