Apparently some on the left are trying to blame Phil Gramm for the subprime lending crisis and the ensuing credit crunch. The theory is that somehow the Gramm-Leach-Bliley Act, which repealed most of the Depression era firewall between investment and commercial banking somehow created the runup in mortgage lending and home values.
In an interview with James Pethokoukis, Gramm responds with a great explanation of what actually caused this crisis (hint: it was 100% government action):
The subprime problem came from an extraordinary run-up in housing values beginning in 2000 as we were in a recession and the Federal Reserve cut interest rates; it was a very unusual recession in that investment had collapsed but home building and consumption were strong, so the monetary policy that was aimed at stimulating the economy [also] stimulated an industry that was in boom condition. Housing prices rose faster than at any time except right after World War II, when wage and price controls came off, and that created this speculative demand.
And secondly, America’s policy to try to encourage home ownership by making down payments lower and lower and lower until they were practically zero in many cases gave the whole thing a hair trigger.
He stops short of patting himself on the back, so I will. Gramm-Leach-Bliley is actually part of the solution. When Bear Stearns, an investment bank, was on the verge of failure, threatening to completely lock up Wall Street’s clearing of securities trades, the Federal Reserve and the Treasury Department turned to J.P.Morgan, a commercial bank, to buy out the condemned company. Under Glass-Steagall, that simply wouldn’t have been an option. The act of Congress that saved the day two weeks ago was passed 9 years ago and it had Phil Gramm’s name on it.
Side note: One more point seriously in John McCain’s favor. When a candidate admits he doesn’t fully understand economics and brings on people like Phil Gramm to fill in the blanks for him, that’s head and shoulders above those other two who clearly don’t understand economics either and don’t care to learn.
The California appeals court that recently ruled that homeschooling parents must have teaching credentials, has agreed to take another look at the matter at the request of another couple who have home schooled 8 children.
“Another look at this case will help ensure that the fundamental rights of parents are fully protected,” said attorney Gary Kreep of the U.S. Justice Foundation, the father of the homeschooled children.
Gary shouldn’t get his hopes up, though. The court has pretty effectively telegraphed its intention to leave its ruling intact by:
inviting written arguments from state and local education officials and teachers’ unions.
In other news, the Treasury Department has hired Jeffrey Skilling to consult on financial regulations in the wake of the subprime mortgage crisis, the TSA has asked Khalid Sheikh Mohammed to consult on airline security and farmers across the country are asking foxes to guard the henhouse.
California homeschooling case to be reheard.
Saddam Hussein’s spy agency financed a trip to Baghdad for US Congressmen prior to the start of the Gulf War. The Justice Department took great pains, in the indictment of the guy who arranged the trip, to state that there is “no information whatsoever” that the Congressmen knew who was paying for the trip.
That’s nice. But here’s what they did know.
- They didn’t pay for it themselves. It wasn’t a vacation.
- Their offices didn’t pay for it. It wasn’t a taxpayer funded junket.
- Tobacco companies, oil companies and all the other much abused US special interests didn’t pay for it. It wasn’t a lobbyist funded junket.
- A “charity” associated with Islamist fundamentalists, of exactly the sort used to funnel money to Hamas and Hezbollah, did pay for it. Two years after Al Qaida attacked the US, three US Congressmen thought they were taking a trip funded by Islamist fundamentalists. I’m not sure that it matters that they didn’t know the trip was actually funded by the relatively civilized Saddam Hussein.
So, the question is, “What did Baghdad Jim McDermott, David Bonior and Mike Thompson know and when did they know it?”
The more Hillary opens her mouth, the more obvious it becomes that she does NOT represent four more years of the Bill Clinton era boom times, when government was relatively hands off and the economy was allowed to grow without massive increases in taxes and bureaucracy.
If Hillary is elected, that is no more. She apparently needs a history lesson, and a recent history lesson at that, to see the effects of command economies in Eastern Europe compared to her husband’s hands off approach. Because a command economy is apparently what she wants:
We need a president who is ready on Day 1 to be commander in chief of our economy.
Alan Greenspan said that Bill Clinton was one of the smartest President’s he worked with, that he understood the lessons the Maestro offered. Perhaps Hillary should consult with her husband on this one.
NY Times: Clinton Calls for $30 Billion for Home Mortgage Crisis.