A Great Article: Overview of how Deregulation created the current Economic Meltdown

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http://www.commondreams.org/archive/2008/03/26/7905/


The Mortgage Mess and the Economic Meltdown: What McCain (and the Rest of Us) Should Learn From the Keating Scandal
by Peter Dreier

The nation’s escalating economic troubles — triggered by the growing wave of home foreclosures, declining housing prices,and bank failures — was entirely preventable. It will take years and trillions of dollars to dig ourselves out of this hole, as the ripple effects of the mortgage meltdown reverberate throughout the economy: millions of families losing their homes. a housing industry in disarray, skyrocketing consumer debt, tight credit, massive lay-offs, neighborhoods in decline, and serious fiscal woes for states and cities.

The issue should be at the forefront of this presidential campaign. John McCain is conspicuously silent, even as George Bush proposes to bail-out Wall Street, which played a major role in getting us into the mess. Barack Obama and Hillary Clinton have offered reasonable ideas for coping with the symptoms (especially homeowners facing foreclosure), but neither has proposed the sweeping reforms needed to address the root causes — five pillars of which are outlined below.

The problem began in the 1980s, when — under political pressure from the banking industry — the Reagan administration and Congress stopped regulating the nation’s financial institutions. Commercial banks and savings-and-loans used their political clout — especially campaign contributions — to get Congress to loosen restrictions on the kinds of loans they could make.

One of government’s important roles is to establish ground-rules, and to regulate companies and industries, to save them from their own short-sighted greed. Government is necessary to make business act responsibly. Without it, capitalism becomes anarchy......

.....So far, neither Democrat has proposed the kind of sweeping reforms needed to restore stability and accountability to the financial services industry and challenge their basic business practices.

Faced with a similar situation, President Franklin Roosevelt worked with Congress to give the federal government the tools it needed to make the banking industry act responsibly. At the time, some critics called him a socialist. But in retrospect, it is clear that what he did was to rescue capitalism. Once again, we have a financial services industry unable to police itself. The next president should tell the American people that “the era of unregulated so-called free-market banking greed and sleaze is over.”

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