| ManusJustus said: First of all, the Gramm-Leach-Biley Act is the cause of the financial crisis. It was passed by the Republicans, including McCain, and Phill Gramm is now McCain's economic advisor. Secondly, the Republicans dominated the Senate, House, and executive branch in 2005. Blaming democrats (specfically here for a symptom on the problem, not the problem itself) would be like blaming your bat boy for your baseball team's low batting average. |
Democrats killed the bill in committee, you can pretend that didn't happen all you want, but that doesn't change the facts.
The deregulation law isn't the cause of all this, though it has some effect. The CAUSE of this is the fact that Fannie and Freddie are government guarunteed companies (implicitely, not explicitely), and their CEO's decided to take huge risks because of this. Fannie is a direct product of the New Deal.
Fannie Mae and Freddie Mac both began taking huge risks with their mortgage products some years ago. These mortgage products were highly profitable when they were being payed on. To remain competitave, traditionally careful companies such as Lehman Brothers entered into this business as well. Freddie Mac and Fannie Mae also led the way on securitizing these sub-prime, high risk loans, so other banks had to follow suit to stay competitive. When the economy hit a bump (as it always does from time to time), these formerly lucrative loan products became toxic debt. Because so many banks had invested so heavily in these products, and because they were securitized across the market (both moves lead by Freddie and Fannie, products of The New Deal), the impact of this crisis is very wide. The CEO's of both companies were willing to take huge risks, partially, I believe, because they knew the government would step in if they ran into problems, this removed excessive risk as a deterrent to making foolish decisions. The system in place for both of these giants was designed to privatize profits, but socialize losses, and this system has failed.
Both parties are clearly to blame in this, I'm not denying that, however, the idea that this is soley (or even mostly) the fault of Republicans ignores who actually helped create the mortgage giants Fannie and Freddie, and that Democrats blocked the legislation designed to prevent this current crisis from happening back in 2005 by not letting it leave the Committee.
