The Republicans are Responsible for the Financial Crisis

Many people think that no party or president can cause an economic crisis like the one we are now enduring. They are wrong. A president’s policies can directly impact the economy. The policies of George W. Bush and the Republicans in Congress are directly responsible for our current mess.

The root of our recent problems is the mortgage crisis. It was caused by the fact that because of Republican legislation which deregulated the banking industry, banks and financial institutions made billions of dollars worth of sub-prime mortgage loans to unqualified people. Thanks to the Republicans, those mortgages were than traded in bulk on the stock market and were purchased by brokerage firms and large banks.

The collapse was the Result of Republican anti-regulation philosophy that put consumers at the mercy of large banks and brokerages. Despite his recent calls for reform, John McCain has always supported broad deregulation of banks and brokerages. He has always characterized himself as a deregulator and he has no history prior to the presidential campaign of advocating steps to tighten standards on investment firms.

Back in 1933, following the stock-market crash, Congress enacted the Glass-Steagall Act, which separated the functions of commercial banks from those of stockbrokerage houses and regulated the way banks could make loans. From then on the government limited the banks in making mortgage loans. It was always the economic philosophy of Republicans in Congress, however, to oppose governmental regulations and to try to abolish the regulations governing banks and brokerages. Among the Republican senators in the 1990s who fiercely opposed any regulation of banks and financial institutions was Phil Gramm of Texas. Gramm, who has always been a close ally of John McCain, is now McCain’s chief financial advisor and co-chair of his campaign. Gramm is being spoken of by the McCain campaign as a top candidate for Treasury Secretary.

In the 1990s, when the Republicans took control of Congress, Phil Gramm was able to pass the Gramm-Leach-Bliley Act which largely deregulated the banking industry and allowed banks to merge with securities firms. John McCain voted for the bill. After that, Gramm slipped an amendment into an omnibus appropriations bill which deregulated the trading of financial instruments and allowed banks and brokers to trade mortgages as if they were stocks and bonds. This opened up the floodgates to massive trading of sub-prime mortgages.

Gramm later left the senate for a top position with UBS, an international financial firm involved in banking, brokerages, and wealth management. UBS is the parent company of the investment firm, PaineWebber. At UBS, Gramm lobbied Congress, the Federal Reserve Bank, and the Treasury Department on behalf of the banks. He sought to have Congress pass a law designed to forbid stronger state laws against predatory lending. As a result of Gramm’s efforts, the law forbidding state regulation of banks was passed, and lenders were free to practice predatory lending. Sub-prime mortgages became routine, and the trading of sub-prime mortgages in bulk became a widespread practice on Wall Street. When millions of people defaulted on those mortgages, the economy went into a tailspin.

Now John McCain, one of the Republicans who deregulated the banks and brokerages and enabled this disaster to happen, is running for President. Without any trace of irony, this Republican is shouting out against the lack of bank regulation! This Republican is talking about putting the chief congressional deregulator of banks into the cabinet as Treasury Secretary. We are being asked to forget about the perennial Republican opposition to bank regulation, and to forget about McCain’s role as a deregulator. We are asked to forget that Phil Gramm and other McCain advisors have been powerful lobbyists for the banking industry.

Governmental regulation of banks and security firms are intended to protect the consumer. If the bank regulations had not been erased by the Gramm-Leach-Bliley Act and other Republican acts, we would not have had this crisis. We now face the devastation of our economy thanks to a Republican and his buddies who got us into this mess in the first place. Do you want eight more years of this economic philosophy? Do you want to reward the gang that caused this disaster?

McCain and Change

John McCain reminds me of Captain Renault, chief of the gendarmes in the movie “Casablanca.” After the Nazis have ordered Renault to shut down Rick’s café, Renault (played by Claude Rains) says to Rick (played by Humphrey Bogart), “I’m shocked, shocked to find that gambling is going on here!” Just then a croupier comes up and hands Renault a fist full of money saying, “your winnings sir.”

John McCain and the Republicans are shocked, shocked that there is such a mess in Washington! Despite the fact that there has been a Republican administration in power for the last eight years, and despite the fact that the Republicans controlled Congress for six of the last eight years, they seem appalled that our economy is nearing a depression, that there is widespread unemployment, that there are massive foreclosures and bankruptcies, and that we have gigantic budget deficits.

Watching the Republican convention I felt that I had wandered into Alice in Wonderland. Here was a party that had been in charge for most of the past eight years, complaining about what they have done to this nation. One had a surreal sense that the Republicans were unaware that this whole debacle was their fault. They are running on the slogan that they are the party of “Change.” The truth is that they are not offering any real change. All they are doing is dragging-out the same old elephant—with white hair and lipstick.

During the primaries John McCain bragged that he was a genuine conservative and that he had voted with President Bush 90% of the time. In 2005 he said on Meet the Press: “The fact is that I have agreed with President Bush far more than I have disagreed. And on the transcendent issues, the most important issues of our day, I’ve been totally in agreement and support of President Bush.” Now he says that he is a “Maverick” and is his own man. Well, what is he?

The biggest issue today is the war in Iraq. McCain has repeatedly said: “‘No one has supported President Bush on Iraq more than I have.” McCain has not outlined any change that he would bring to Iraq. On the contrary, he would keep our troops there indefinitely. That war is costing us $144 billion a year, and the huge deficits that this is causing are ruining our economy. Obama opposed that war from the outset. Which candidate stands for change?

McCain has said that he supports President Bush on the tax cuts that Bush gave to wealthy Americans. He would not only make those tax cuts permanent but would increase them. He would also lower the tax rates for corporations, thereby giving oil companies an additional $3.7 billion a year. He refuses to tax the windfall profits of oil companies. Obama has said that he will give tax cuts to middle income and low income Americans and will increase taxes only on wealthy Americans, wealthy corporations, and oil companies. Which candidate stands for change?

McCain supported Bush’s plan to risk our Social Security and Medicare benefits through privatization. Is this the kind of change that McCain stands for? Would he destroy our Social Security system? Obama would protect Social Security and Medicare.

Though he claims to have a "comprehensive economic plan," McCain supports the same Bush economic policies and unfair trade deals that have hurt American workers and have led to the loss of hundreds of thousands of American jobs. He has repeatedly voted against programs to assist workers displaced by International trade agreements. Obama would deny tax benefits to corporations that ship jobs overseas. Which candidate stands for change?

McCain’s health-care plan would do nothing to solve the massive health insurance problem faced by millions of Americans. While Obama would make sure that all Americans are covered by health insurance, McCain says he would treat employer-sponsored health benefits as taxable income. Nothing in his plan would deal with the underlying problem of uninsured and underinsured people.

On March 5, President Bush embraced John McCain, and John McCain said that he wanted Bush to campaign for him. You know that this would not have happened if McCain had opposed Bush on any big issues. Bush knows that McCain has supported him throughout, and he’s the man Bush wants in the White House. It is the next best thing to having Bush there himself.