Thursday, October 09, 2008

Rebutting the talking points

On the very day that this post appeared at Hot Air, this editorial letter appeared in our local paper. The subject of both was the Obama campaign talking point casting the 1999 repeal of the Glass-Steagall Act as the origin of the current credit market mess. While it was then-president Bill Clinton who signed the bill repealing the act, the Obama campaign places the blame for pushing the bill on Phil Gramm, an advisor to the McCain campaign. Here's the text of the letter:
This current financial meltdown is just a repeat of some of the causes of the crash of 1929 that led to the Great Depression.

One of the main reasons for the crash was that banks were involved in trading securities (stocks) as well as keeping people's hard-earned savings. Once the market crashed, a ton of banks defaulted because they lost money on the market.

In 1933, Sen. Carter Glass and Rep. Henry Steagall got Congress and FDR to pass the Glass-Steagall Act, which separated investment institutions from commercial (savings and loan, mortgage) banks.

The Act worked great until 1998, when Travelers Insurance wanted to merge with Citibank. After Citi and its allies spent $200 million in lobbying Congress and raising $150 million in political donations along with former JPMorgan director and then-Fed chairman Alan Greenspan's push, Congress repealed the 1933 Act.

Guess who co-sponsored the repeal--Phil Gramm, John McCain's former campaign economic advisor.

And the Treasury Secretary who heavily influenced President Clinton to sign the repeal was Robert Rubin, who later got a job with Citicorp.

Because of the investment-commercial bank mergers, these newly directed institutions began, among other crazy things, aggressively pushing subprime mortgages because these high-yielding instruments became "investments" instead of old-fashioned, stable, traditional mortgages.

This, in turn, affected people's hard-earned savings in these investment banks because of all the mortgage defaults.

You'll never hear any presidential candidate say they want to re-enact the Glass-Steagall Act because of the large amount of campaign donations from such entities, even though it would be the sensible thing to do.

Until the Glass-Steagall Act is reinstated, this mess will continue to cost taxpayers billions, with no end in sight.
My own editorial letter rebutting this claim appeared in today's edition:
Gary Olsen's Oct. 1 letter about the Glass-Steagall Act requires a response to set the record straight ["Repeal of Glass-Steagall Act is what fueled the crisis"].

Glass-Steagall is the latest Barack Obama campaign talking point to misdirect the blame for the current financial crisis toward Phil Gramm, a McCain campaign adviser. This is a red herring.

Repeal of Glass-Steagall wasn't a classic act of deregulation, as the Democrats like to describe it. It sailed through the Senate on a 90-8 vote, which included "yes" votes by such notable Democrats as John Kerry, Chris Dodd, John Edwards, and Joe Biden.

Bill Clinton, far from being "heavily influenced," as Mr. Olsen puts it, by then-Treasury Secretary Bob Rubin, said in a recent interview on this matter: "I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis."

The current mess has nothing to do with Glass-Steagall and everything to do with Fannie Mae and Freddie Mac promoting loans to unqualified buyers and repackaging them as securities that they then sold to investment banks.

When the Clinton and Bush administrations tried on multiple occasions to reform and more closely regulate Fannie and Freddie, they were blocked at every turn by Democrats in Congress.

According to the Center for Responsive Politics, the top five recipients of campaign contributions from Fannie Mae and Freddie Mac employees and PACs are Democrats, and Barack Obama managed to rank third on that list in his brief time in national politics.

It's in Obama's best interest to direct accusing fingers elsewhere.
The Obama campaign is energetically getting supporters to write letters to the editor of their local papers to parrot their talking points, and they should be responded to at every turn. Do your part and write a letter to the editor today!


Mark said...

How many people are actually reading the dead tree editions these days?

Eric said...

Eh, not sure. The Free Lance-Star has pretty good circulation around here, but then again, a fairly small market with no local competition. The letters to the editor still show up in the online edition, though.