It was the left-- the "liberals" or "progressives"-- who led the charge to force lending institutions to lend to people whose credit history made them eligible only for "subprime" loans that were risky for both borrowers and lenders.
Out right lie. It was Henry Paulson, the current treasurer and the Bush Administration In 2004, at the request of the major Wall Street investment houses, including Goldman Sachs, then headed by Paulson, the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint that was put forth by the investment banks was of increasingly onerous regulatory requirements -- in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. In the immediate lead- up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms' reserve holdings if the SEC agreed to do so instead. The 1999 Gramm-Leach-Bliley Act, however, put the parent holding company of each of the big American brokerages beyond SEC oversight. In order for the agreement to go ahead, the investment banks lobbied for a decision that would allow "voluntary" inspection of their parent and subsidiary holdings by the SEC. During this repeal of the net capital rule, SEC Chairman William H. Donaldson agreed to the establishment of a risk management office that would monitor signs of future problems. This office was eventually dismantled by Chairman Christopher Cox, after discussions with Paulson. According to the New York Times, "While other financial regulatory agencies criticized a blueprint by Mr. Paulson, the [new] Treasury secretary, that proposed to reduce their stature — and that of the S.E.C. — Mr. Cox did not challenge the plan, leaving it to three former Democratic and Republican commission chairmen to complain that the blueprint would neuter the agency."[11] In late September 2008, Chairman Cox and the other Commissioners agreed to end the 2004 program of voluntary regulation. On Nov 20, 2:23 pm, Travis <[EMAIL PROTECTED]> wrote: > From: Travis > Subject: Don't use temporary economic woes to remake U.S. institutions > Date: Wednesday, November 19, 2008, > > *Don't use temporary economic woes to remake U.S. institutions > *Thomas Sowell > Sunday, November 16, 2008 > > The truest thing that Senator John McCain said during the election campaign > is what got him into the most trouble: "The economy is sound." > > "Sound" does not mean bullet-proof. Nor does it mean that everything is > going wonderfully at the moment or that nothing needs to be done. > > You may be as sick as a dog from having eaten the wrong thing. But that does > not mean that you need to have your arm amputated or to receive massive > doses of morphine. In other words, your body may be perfectly sound-- and > radical medical treatment can do more lasting damage than your temporary > suffering will. > > The political left has always known how to exploit temporary economic > problems to create lasting institutions reflecting their ideology. The > "progressives" did that during the brief time that America was involved in > the First World War, less than a year and a half. > > In that brief time, they clamped on all kinds of economic controls and even > restrictions on free speech that led to landmark Supreme Court cases. > > When the Great Depression of the 1930s brought many of those same > "progressives" back to power, led by one of the "progressives" from Woodrow > Wilson's administration, Franklin D. Roosevelt, they brought the same > mindset to government again, calling themselves "liberals," now that the > label "progressives" had been discredited by their previous actions. > > By the end of the 20th century, "liberals" had again discredited themselves, > to the point where they went back to calling themselves "progressives" to > escape their past, much as people do when they declare bankruptcy. > > Wars, economic crises and other disruptions all provide opportunities for > the left to seize on current problems to create enduring changes in the > institutions of society. That is what we are witnessing today. > > The media have hyped current economic problems to the point where you might > think we were heading for a replay of the Great Depression of the 1930s. > They have been dying to use the word "recession" but there is a clear > definition of recession-- two consecutive quarters of negative growth-- and > we have yet to reach that. > > If the meaning of words can be changed to suit political convenience, then > discussions become an exercise in futility. > > Official data show that the output of the economy in the most recent quarter > is down-- by less than one-half of one percent-- but at last the media have > one of those two quarters required to qualify as a recession. > > Whether they will get the other quarter that they need, in order to start > using the word "recession" legitimately, is another story. In fact, the > data-gathering process is by no means so precise that we can expect the > one-half of one percent decline to hold up, since such statistics often get > revised later. > > It is not just a question of being able to put scare headlines on newspapers > or alarmist rhetoric on television. Such things are just the prelude to > massive political "change" in fundamentally sound institutions that have for > more than two centuries made the American economy the envy of most of the > world. > > If the left succeeds, it will be like amputating your arm because of a > stomach ache. > > To add to the painful irony, many of those who are most eager to have a > massive government intrusion into the market are among those whose previous > intrusions into the market are largely responsible for the current financial > crisis. > > It was the left-- the "liberals" or "progressives"-- who led the charge to > force lending institutions to lend to people whose credit history made them > eligible only for "subprime" loans that were risky for both borrowers and > lenders. > > It started way back in the Carter administration, with the Community > Reinvestment Act, and gained momentum over the years with legal threats from > Attorney General Janet Reno and thuggery from ACORN, all to force lenders to > lend where third parties wanted them to lend. Now we have a bad stomach > ache-- and now the left wants to start amputating the market. > > *Thomas Sowell is a senior fellow at the Hoover Institution, Stanford > University, Stanford, CA 94305. His column is distributed by Creators > Syndicate, 5777 W. Century, Suite 700, Los Angeles, CA 90045. 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