Robert Scheer- How Reagan Republicans and Clinton Democrats Enriched Wall Street

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Tue Sep-07-10 07:47 PM
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Robert Scheer- How Reagan Republicans and Clinton Democrats Enriched Wall Street

Robert Scheer on The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street

ROBERT SCHEER: Well, you know, you say a longtime journalist. I worked for the Los Angeles Times as a national reporter, and I covered these hearings in Washington when the Clinton Administration in the '90s basically fulfilled the promise of the Reagan Revolution. Reagan was not able to reverse the sensible regulations of the New Deal of Franklin Delano Roosevelt designed to prevent us from getting into another depression. And those regulations of Glass-Steagall, which Feingold was against—was for keeping and against reversing, said that investment banks playing with supposedly rich people's money should not be allowed to merge with commercial banks that were using the deposits of people that were insured by the taxpayers and that these were different activities. And Reagan could never pull off that kind of deregulation. In fact, because of the savings and loan scandal at the end of his term, he actually had to sign off on increased financial regulation. But when Clinton came in, he brought in one of the big players on Wall Street, Robert Rubin, who has been head of Goldman Sachs, and basically turned to him and said, "You know, what do I need to do to get Wall Street on my side?" And they said, reverse what they considered to be onerous financial regulation. And Clinton delivered on that. He brought in Rubin then to be his Treasury secretary, who was followed by Lawrence Summers, who’s now the top economics adviser in the Obama White House.

And in addition to the Gramm bill that reversed Glass-Steagall, he did something even more significant for our current crisis. He—after Summers had pushed it through, Congress signed off on the Commodity Futures Modernization Act of 2000. He was already a lame duck president. It was in the closing weeks of his administration. And this is the source of our whole problem, really, in terms of the housing meltdown, because we had these suspect derivatives that sensible people in the administration, like Brooksley Born, had warned against. No one knew what these toxic investments all about, the bundling of mortgages, which is what encouraged all of the wild subprime and Alt-A financing, because they were then going to be packaged together, made into securities, and then backed by credit default swaps, and all of this stuff that really didn’t exist. It certainly didn’t exist in Adam Smith’s capitalism, but it didn’t really exist even in Ronald Reagan’s capitalism. This newfangled—these gimmicks that were developed and spiraled wildly out of control were made possible because of that Commodity Futures Modernization Act, which Clinton signed and which said in Titles III and IV, no existing government regulation, no existing government regulatory body, will be allowed to supervise these credit default swaps, these collateralized debt obligations that were there.

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AMY GOODMAN: Robert Scheer, your last chapter, "Sucking Up to the Bankers: Crisis Handoff from Bush to Obama"—has Obama done anything different about the economy than Bush, do you feel?

ROBERT SCHEER: No. Obama has been a disaster. And I say this as someone who was suckered into contributing to his campaign financially. You know, my wife maxed out in her contributions, pushing those buttons every time. I still get emails from the Obama campaign telling "We’re winning here, we’re winning there." But it’s been a disaster. Now, maybe, you know, if he could appoint Elizabeth Warren, you know, to the consumer agency, there will be a little bit of value in this deregulation—in this new regulation. But—

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http://www.democracynow.org/2010/9/7/robert_scheer_on__the_great