How We Got Here – 3

This from The Heritage Foundation is the lead paragraph:

A financial bubble fueled by easy money and loose credit bursts. Unemployment shoots up, and gross domestic product falls sharply. Some in the U.S. Congress blame foreigners for unfair trade practices and pass a trade bill that prompts widespread retaliation, exacerbates the popping of the bubble, and sends the country into further economic trouble. That is what happened with the Wall Street Crash of 1929, the Smoot–Hawley Tariff Act of 1930 and the Great Depression. Americans might hope our leaders would learn from our past mistakes. But the leftist majority in Congress, aided by some misguided members of the minority, is trying to repeat this terrible history.

There is not a lot of truth in that first paragraph.  First of all, one needs to understand what caused the Great Depression of the 1930s.  There was a speculative bubble during the last half of the 1920s that finally burst in 1929.  And not at all that different from the bubble that burst two years ago.

Anyway, as a result of investigations into the cause of the crash,  the Glass-Steagall Act was passed in 1933.  One of the purposes of this law was to put a wall between the banks that take deposits and lend money to buy homes and the investment banks that were involved in more speculative ventures such as underwriting stocks.
And this seperation worked fine.  But in the 1980s, some bankers with more greed than patriotism began to lobby congress for a repeal of Glass-Steagall.
If we go back to the last years of the Clinton administration, 1999 to be exact, a Senate with a 54–44 vote along basically-partisan lines (53 Republicans and one Democrat in favor; 44 Democrats opposed) voted for the Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999.

The Senate at that time had a Republican majority.  All three sponsors were Republicans (Sen. Phil Gramm (R-Texas), Rep. Jim Leach (R-Iowa) and Rep Thomas Bliley (R-Virginia).  If President Clinton had vetoed the bill, the Senate would not have had enough votes to over-ride the veto.
53 Repubs  –  45 Dems

Now, President Clinton ran and won under the “Dem” banner.  But, as explained in How We Got Here, Clinton was of the Neo-liberalism/open borders/free trade school of economics.  Both NAFTA and the World Trade Organization came into being on Clinton’s watch.  Bretton Woods was in the dust-bin of history by now which meant that governments were not in control of their own currency (and the control of capital flows) but the private business sector was.  Profit was the motive now, not the well-being of the citizen.

Explore posts in the same categories: Domestic Issues, Economy


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