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 Robert Scheer on The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street September 10, 2010 We speak with veteran journalist and Truthdig editor, Robert Scheer, about his latest book, The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.
EXCERPT
And in addition to the Gramm bill that reversed Glass-Steagall, he (President Clinton) did something even more significant for our current crisis. He—after Summers had pushed it through, Congress signed off on the Commodity Futures Modernization Act of 2000. He was already a lame duck president. It was in the closing weeks of his administration. And this is the source of our whole problem, really, in terms of the housing meltdown, because we had these suspect derivatives that sensible people in the administration, like Brooksley Born, had warned against. No one knew what these toxic investments all about, the bundling of mortgages, which is what encouraged all of the wild subprime and Alt-A financing, because they were then going to be packaged together, made into securities, and then backed by credit default swaps, and all of this stuff that really didn’t exist. It certainly didn’t exist in Adam Smith’s capitalism, but it didn’t really exist even in Ronald Reagan’s capitalism. This newfangled—these gimmicks that were developed and spiraled wildly out of control were made possible because of that Commodity Futures Modernization Act, which Clinton signed and which said in Titles III and IV, no existing government regulation, no existing government regulatory body, will be allowed to supervise these credit default swaps, these collateralized debt obligations that were there.
And as a result, we had this wild runup of irresponsible mortgage lending. The banks no longer did, as in the old days, worry about whether you could make your payments, whether there was value in the house, because they weren’t going to hold that mortgage for thirty years like in the old days. They were going to sell it, you know? And that wild runup of the market—I call it the Clinton bubble. I think his administration deserves or should be given the main responsibility. And that is at the source of our problem. And this has not gone away. This is why we’re threatened with a possible 'nother steep decline, or we're threatened with a decade of Japanese-type stagnation. And the reason is because we now, taxpayers, are holding, you know, trillions of dollars of this stuff, these toxic investments. And as a result, housing right now is in a terrible state of affairs. There are 11 million homeowners that are underwater. They owe more on their mortgages than their houses. That translates to about 50 million people living in houses that are now worth less than what they owe on them, and they’re tempted to walk away from them. That’s why we don’t have any consumer demand. And it’s not just the people who are in trouble with their own houses, which is a tragic enough story, but even if somebody’s made every payment, even if they own their home outright. If you foreclose a house or two in that neighborhood, it brings everyone else down.
And all this stuff that Obama has been talking about really does not meet the problem. And the basic problem is, instead of throwing money at Wall Street, which is what Bush did and what Obama continued to do, you should have had a moratorium on housing foreclosures. You should have said, "OK, Wall Street, we’ll help you, but you are now going to be forced, through bankruptcy courts, new rules we’re going to put in place, to adjust people’s mortgages so they can stay in their home." And all this malarkey about "We’ll do more infrastructure," you know, and so—they always do that. We’ll spend $50 billion on this—what he said in Wisconsin. What is that $50 billion? It’s chump change compared to, say, the $300 billion of toxic investments by one group, Robert Rubin’s bank, Citigroup. He went, after he left the administration, to be a top bigshot at Citigroup, made possible by the reversal of Glass-Steagall. And, you know, $300 billion. So compare that to the $50 billion they’re going to do for infrastructure for the whole nation.
And I think the sad thing about Obama—you know, obviously, I supported him. I wrote columns thinking he was going to be great. An enormous disappointment. Somebody—no one can explain to me—I haven’t seen a satisfactory explanation. But in my book, I reprint the speech that Obama gave in the spring of '08, when he was a candidate. And it came three months after Robert Rubin had given a speech at Cooper Union saying we had no financial problem, we had no crisis. Three months later, Obama, at that same Cooper Union, said, you know, this is all due to reversal of Glass-Steagall, all due to reckless, radical deregulation. He spelled it out. And then, you know, mysteriously—maybe not so mysteriously when you think that Wall Street became his biggest, financial community became his biggest campaign contributor—he turned to the disciples of Robert Rubin—the Lawrence Summers, Timothy Geithner, the very people that had, with Rubin, created this mess—and said, "OK, you guys, fix it all." And they haven't fixed it. They’ve taken care of Wall Street. And as my subtitle in my book said, they mugged Main Street.
Read the full interview at:
http://www.democracynow.org/2010/9/7/robert_scheer_on__the_great
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