Andrew Holleran / Photo editor
Patrick Seaworth identifies as a Republican.
The financial crisis we are emerging from nearly crippled this country. It also largely contributed to the United States’ more than $16 trillion debt. So the questions become: What does that number mean, how did we end up in this mess and who is to blame?
First, what is $16 trillion?
According to the Congressional Research Service, a non-partisan government research branch assigned to Congress, the cost of all American wars including estimates through 2011 are less than $6.48 trillion 2011 dollars. In other words, our Independence, the Civil War, defeating Adolf Hitler and Japan in World War II ($4.1 trillion), the Cold War and bringing Osama Bin Laden to justice amounts to roughly two-fifths of our current debt.
So how did we get here and who’s to blame?
Former President George W. Bush was in office when the financial crisis took place, yet the roots of this conundrum lie with a different president, Bill Clinton. The failure to avoid the crisis stems from the Democrats’ resistance to the efforts Bush put forth to reverse the crisis.
In 1999, Clinton repealed the Banking Act of 1933, commonly referred to as the Glass-Steagall Act. One of the main tenants of the act was that it clearly separated investment banking from commercial banking. Clinton said the act was “no longer relevant,” in 1998, as he pushed for the deregulation of banking. On the 10th anniversary of the repeal, The New York Times quoted the words of one of the few opposing voices at the time, Senator Byron Dorgan (D-N.D.).
“We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness,” Dorgan said in the article.
The New York Times reported in September 1999, “Fannie Mae has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people … (Fannie Mae) may run into trouble in an economic downturn, prompting a government rescue.”
It was this pressure that largely contributed to the mortgage crisis of 2008.
So what about Republican failures?
During the 50 years prior to President Barack Obama, as reported by the public policy publication “National Affairs,” “the greatest growth in regulation came under President’s Richard Nixon and George W. Bush.”
The White House’s own archives show Bush’s initial, formally issued concerns with Clinton’s practices in his projected 2002 budget, which, “declares that the size of Fannie Mae and Freddie Mac (GSE’s) is, ‘a potential problem’ … which could cause strong repercussions in financial markets.”
We have been told that we were taken into this financial dark hole by Bush. Yet history tends to disagree.
“The oldest propaganda technique is to repeat a lie emphatically and often until it is taken for the truth,” said James Rickard, financial analyst and military consultant on financial warfare and author of “Currency Wars.” “In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law.”