Deregulation, Meltdown,

Republicans, Democrats 

          The financial meltdown and the presidential campaign have dove- tailed to give the American voter a valuable lesson in the key differences between traditional Republicans and traditional Democrats. Besides temperament and judgment, two major differences stand out that inde- pendents might want to keep in mind Nov. 4.
          All of John McCain’s proposals would spend tax dollars on pro- grams by filtering them through private industry so businesses and Wall Street can take a cut and have an ownership interest in the programs. Barack Obama’s would do some of the same, but he is not shy about having the federal government deliver tax dollars directly to programs, without a private industry middleman. Republican philosophy versus Democratic philosophy.
          Because of the Republican belief that government should be as involved as little as possible in American’s lives, its adherents believe there should be as little regulation of private industry as possible. Demo- crats are not shy about imposing regulations on private industry when they feel private industry has or will not practice self-restraint and regu- late itself.
          The problem with non-regulation is the same one as parents deciding to let junior be junior, and anyone who has been in a super- markets knows the result of that. Humans have certain genetic traits that may have helped the race evolve, but are no longer very attractive. One of them is greed. If there ever was a human trait that needed to be regulated, it is greed.
          The financial meltdown, the effects of which are going to be felt by the American public (and pretty much the rest of the world in this era of globalization) for years to come, had its beginnings in two huge political deregulation moves, one when Congress was under Democratic control, the other when it was controlled by Republicans. The driving force that got it to the meltdown stage was greed.
          Two major deregulations brought an ages-old government philo- sophy of “too big to fail” up from little more than a policy-wonk concern to today when it is a linchpin of the government’s attempts to deal with the meltdown.
          At the tail end of a generation of Democratic control of Congress, Congress passed the Riegel-Neal Interstate Bank Branching Act of 1994. The legislation was introduced by Rep. Stephen Neal, a North Carolina Democrat, lawyer, former banker and 20-year member of Congress serving in his final year. At the time, Neal was second-ranking Democrat on the committee headed by Henry Gonzalez, a Texan not considered high on the list of intellectuals.
          The Senate Banking Committee, chaired by Don Riegle, a Michi- gan Democrat who had begun service in Congress as a Republican, took up the House-passed bill, passed it and sent it to the White House where President Bill Clinton signed it into law. Riegle became one the savings and loan scandal’s “Keating Five,” a group including John McCain.
          Banks were prohibited by from operating beyond their own state borders. The Bank Branching Act lifted those restrictions on all commer- cial banks, giving the states the option (almost universally exercised) to allow their state-chartered banks to operate across the state lines.
          Neal’s state of North Carolina included First Union National Bank. Across the state border was Wachovia of South Carolina. They wasted no time in merging and spreading their banks through several states. Allied but separate institutions First Union Corp. and Wachovia Bank Holding could still not merge their various financial services with their banks.
          Today’s financial meltdown has been called the most serious one since the Great Depression, a situation expected to be prevented by government entities, programs and regulations Republicans largely fought against creating.
          Actually, today's meltdown has exceeded that event in terms of scale. As part of the effort to get control of the depression meltdown, one of the New Deal reforms was the Glass-Steagall Act of 1935. It not only created today’s deposit insurance system, it barred commercial banks from engaging in investment banking and underwriting insurance. It also gave the Federal Reserve system more muscle, making it into to- day’s central bank.
          Republicans gained control of both houses of Congress in 1995. Jim Leach, an Iowa Republican, became chairman of House Banking and Phil Gramm, Texas Republican became chairman of Senate Banking. Together they maneuvered through both houses the Financial Mod- ernization Act of 1999, which they named after themselves and Tom Bliley, a Virginia Republican, the Gramm-Leach-Bliley Act of 1999.
          The law repealed Glass-Steagall, allowed financial institutions, including banks, to create financial holding companies so one corpora- tion such as today’s Wachovia could merge its various financial services into one gigantic corporation. And now Wachovia is being purchased in a fire sale by another megabank.
          Officials of the Federal Deposit Insurance Corp., a government institution affected by both of the acts, warned four years ago of the dangers of the widespread consolidation that occurred since the savings-and-loan crisis, creating megabanks concentrating assets and deposits in just a few places. They warned of the idea of “too big to fail” becoming a reality.
          They were ignored and now the government has decided some of the gigantic financial institutions are so big that allowing them to fail would have catastrophic repercussions through American society, and by extension in the globalization era, just about the entire world.
          Late into his campaign for the presidency, John McCain echoed the philosophy of his fellow Republicans and boasted of his stance against regulations, proudly calling himself “the deregulator.” He no longer does so, but failed to suggest or even endorse any return to regulation.
          In fact, at a campaign stop, a man with no understanding of what is going on angrily railed against growing socialism. McCain did not correct him. Barack Obama, has joined Democrats in moving to restore regulations.
          All but most libertarians in Congress signed onto the nub of the beginning of regulatory restoration when they finally voted for the bailout bill to begin an effort to restore some federal control of the nation’s financial system, an effort expected to dominate the term of the next president.
          Intellectual libertarians strangely endorse government actions to halt the meltdown with intervention, i.e., regulation and control, but hasten to call for an end to the cure once the patient is well again.
          And it should not be forgotten that the same Phil Gramm most responsible for the deregulation that allowed the current mess of greed served as the McCain campaign's economics adviser until long after the low and middle classes already were living stagflation, that the nation was a bunch of whiners. So much for guilt by association.