Friday I wrote about how I hated Reagan with a white-hot passion. Today, I would like to explain why, in further detail.
Remember Reagan’s “Nine Most Terrifying Words“?
“The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.'”
He then added,
“Unless you’re in the wealthiest One Percent of America. In that case, call me anytime!”
Well, that’s what he should have said. Because that was at the heart of Reagonomics, sometimes called “trickle-down” economics, sometimes called “voodoo” economics, and more recently called “put your head between your legs and kiss prosperity goodbye” economics. And George Bush practices it, religiously, and without Reagan’s late-term realization that he had to raise taxes or destroy the economy altogether. In Bush’s world, the elite One Percent are, indeed, his base.
We’ve been told so many conflicting things about the credit crunch that has been panicking the stock market and the business world. One thing everyone agrees on is that it started with bad mortgage debt. But how did the debt get so bad in the first place? Why did so many banks make such risky loans to people who couldn’t afford to pay them back? And why where they able to bundle the debts together and swap them among different entities, effectively making it impossible to tell who owns what piece of the bad debt at any given time?
Well, as we know, it was Bill Clinton’s fault. (Isn’t everything?) He relaxed the regulations in the Glass-Steagall Act in 1999. That was the root of all evil.
One policy Clinton said he doesn’t regret is his repeal of the Glass-Steagall Act in 1999, which, for the first time since the Depression, allowed commercial banks to engage in investment banking activities. Clinton said the commercial banks were an important moderating force on the risk-taking of the big investment firms that collapsed this week. “In the case of the current crisis, I believe the bill I signed allowed Bank of America to take over Merrill Lynch,” he said.
Huh. Well, I guess he would know. And it does seem weird that nothing happened for several years after the repeal of this Act if it is, indeed the cause of our current crisis. Could anything else have happened to cause this disaster?
Meanwhile, the primary mortgage market was coming under the spell of the underwrite-nearly-everything mentality spurred on by Fannie and Freddie. We’ve mentioned that Fannie and Freddie also imply a government guarantee. Now, we have a situation where the Fed has shown its readiness to put the tax payer’s money behind anything it deems too big to fail. Both actions were like chumming the waters. Rising house prices were just more blood on the water. It was only time before the piranhas and sharks came to feed. They were being encouraged to ignore risk and that’s not a wise thing to do.
Five investment banks, including Goldman Sachs, approached the SEC with a proposal around 2004. They sought an exemption for their brokerage units from old depression-era regulations that limited the amount of debt they could incur. An exemption from this leverage rule would free up a heckuva lot of money to invest in some new-fangled investments: mortgage-backed securities, credit derivatives, and credit default swaps. They got permission. Enter the net capital rule that enabled the piranhas and the sharks. During the next few years, leverage ratios increased until for about every dollars worth of equity held by an investment bank, there was around $30 in debt.
And now, we get to the heart of the matter. Yes, the One Percent came calling (led by Henry Paulson, who was then CEO of Goldman Sachs – yet another Bush Fox set to guard the People’s Henhouse), and the SEC, run by another Bush Fox, was happy to extend a helping hand.
What we are fighting for in this election, in my opinion, is the idea of what government should be about. Should it be about the 99%, or the 1%? Every time the government stretches out its hand to help, should it be to the most privileged, or to the least?
Now here’s where Reagan was really insidious. And I don’t think I was fair to Sarah Palin when I said she was a Reagan Republican. She’s got some Teddy Roosevelt in there too. Her kids go to public school. She has gone without health insurance. One of her kids is in Iraq. She gets what it’s like to be a regular person, and she has gone against her own party, fighting corruption and instituting reforms.
But according to Reagan, she deserves nothing from the government, because there’s a One Percent chance that maybe, somehow, she might take advantage of that help. Remember those lovely stereotypes Reagan perpetuated? Welfare queen in a Cadillac come to mind? So welfare is, then, bad. Any government program is bad, especially if it benefits people who are morally questionable (such as those homo-sexuals or those Negroes, or even women who dare to become pregnant without being married). Yet, of course, the moral character of the One Percent is never questioned. Money appears to confer all the virtue necessary for these fine upright practitioners of Reagan/Bushonomics.
We all know it’s time for a change. When you have a government that refuses to help the Gulf Coast during a hurricane, but is more than happy to extend every courtesy to giant corporations in order to allow them to coin money at Gulf Coast residents’ expense, then something is very, very wrong. We need to get back to government of, by and for the 99 Percent.
Too bad we cast aside our one chance to make that happen this year.