2009-06-26 Did Clinton cause the banking crisis

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Excerpt

On Wall Street and Main Street they call William Jefferson Clinton the "Comeback Kid," but it's not because of some Election Day surprise.

It's because almost everything he did regarding financial-services regulation has come back to haunt us.

If it wasn't apparent before, the former president's handiwork became clear when President Barack Obama announced his plans for sweeping financial-services reforms. Obama's efforts to bring fair dealing to the mortgage markets, rules to the derivatives marketplace and restraint to big financial companies underscore the missteps of Clinton's second term.

We had weakly regulated markets when Clinton took office, but by the time he left, they were an invitation to lawless dealing. For the ease of it, Willie Sutton would have traded his gun and mask for a briefcase and necktie.

Clinton created a fertile environment for home-lending charlatans and hiding places for Wall Street swindlers, and upset a regulatory structure that had served the financial marketplace so well for more than six decades.

Specific legislation the article criticizes Clinton for passing:

  • 1997: "...a change to the amount of taxes a homeowner had to pay on the sale of his or her home, up to $500,000. That change effectively made buying and selling a home for profit the most compelling investment in America by tax standards. It shifted our housing market from one of supply and demand to one of rampant speculation."
  • 1998: failure to push for tighter regulation on the new derivatives market, in the wake of Long-Term Capital Management's failure and subsequent $3.6b bailout (Alan Greenspan and Arthur Levitt advised against action)
  • 1999: repeal of Glass-Steagall (or large portions of it), removing the wall between investment and commercial banking



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