Seismically false Republican statement of the day
Today the House of Representative passed a consumer protection act that will, for the first time, regulate the derivatives market, which at $600,000,000,000 is larger than the sum of economic output in the United States since World War II.
McClatchy Newspapers’ Kevin Hall:
“The Wall Street Reform and Consumer Protection Act of 2009 would, among other things, create a mechanism for government to dissolve huge globally interconnected banks; provide first-ever regulation of…derivatives; rein in excessive speculative investment on Wall Street; require banks to set aside more capital in reserve; eliminate the much-maligned Office of Thrift Supervision; give shareholders a greater say on executive pay; and tighten supervision over credit-rating agencies who sold out investors.”
Considering we are just beginning to emerge from the greatest financial disaster in 70 years, a little attention to the matter might once, in an earlier era, have been thought to generate some bipartisan support. But not today. Not a single Republican saw fit to do anything about the horror that beset millions of households that lost their houses and substantial portions of their savings.
Here’s Jeb Hensarling (R-TX): “At a time when the economic policies of this Congress, of this administration, have produced the highest unemployment rate in a generation, they propose legislation that will make credit more expensive, less available, and crush jobs.”
I don’t know where to begin in repudiating this line of unvarnished horse manure.
The beginning is as good a place as any:
…the economic policies of this Congress, of this administration, have produced the highest unemployment rate in a generation…
Unemployment is a lagging indicator; this means it reflects the policies that prevailed in the preceding months [up to 2-to-3 years, it can be safely said]. Unemployment bottomed out in October, 2000. It began to rise after 9/11, hit another low in October, 2006, then peaked (God willing) in June, 2009.
So even if you attribute all the rise in unemployment after 9/11 to 9/11, the unemployment rate over the last few years must be said to be the result of the policies of the preceding Congress and the preceding administration. They were in charge for eight years; the current Congress and Obama, less than one. This should be obvious to anyone who has ever read a news account of an unemployment report, but it has either escaped Rep. Hensarling, or he is being deliberately dishonest.
…they propose legislation that will make credit more expensive, less available, and crush jobs.
Jim! Over here! Cheap credit is what got us into this mess in the first place. Does Hensarling represent Mars, or Texas? Let me revisit the chronology for him:
Financial professionals sought better returns. So they devised complicated instruments discernible only to themselves (and sometimes not even that, as anyone currently working in the Financial Products division of AIG can tell you), that would produce these returns if they were fed the right set of numbers (which were frequently ginned up, as anyone who did commercial real estate deals with Bear Stearns this decade can tell you).
Meanwhile, the head of the Securities and Exchange Commission used his influence with Congress to intervene when it was suggested that someone keeping an eye on how these instruments were made and sold might not be a bad idea.
At the same time, the Federal Reserve set low interest rates so as to engineer a “soft landing” from the Internet bubble of the late ’90s.
And in what can reasonably be characterized as tragic, the Bush administration valiantly sought to extend home-ownership to the poor and minorities, groups that had historically been unduly denied access to credit, because it believed more and broader individual ownership to be inherently valuable. Hence, federal lending standards were relaxed.
The combination resulted in a lot of mortgages for a lot of over-inflated houses to be sold to people who couldn’t afford them, and then packaged with other deals of varying quality into securities so opaque that even the people writing them didn’t know what was in them—all the while no one in government was looking.
But Jeb Hensarling stands firm.
Written by ptullis
December 11, 2009 at 9:15 pm
Posted in politics
Tagged with barney frank, Bear Stearns, Credit rating, Credit rating agency, Federal Reserve System, Government, greenspan, jeb hensarling, new consumer protection agency, U.S. Securities and Exchange Commission, United States, United States House of Representatives, Wall Street Reform and Consumer Protection Act of 2009
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