Saturday, September 20, 2008

Political Investment

A significant portion of the American Left, reaching epidemic levels among the Blogger Boyz, is so deeply invested in blaming Bill Clinton for every real or imagined failure of liberal politics that they are undermining any attempt to accrue political capital for the causes they allegedly support.

They have bought so heavily into that stock that they now hold a portfolio without sufficient diversity to withstand turmoil in the political market, persistently holding on to toxic securities (because everyone knows it is all Bill Clinton’s fault, a fundamental that will never change, like ever-appreciating home prices), rather than sell off that non-performing asset and capitalize on a risky but promising situation, getting the Democrats back in control of the government.

Or, to eschew the over taxed metaphor, if Democrats would simply stop mindlessly repeating rightwing lies and the opportunistic misrepresentations of intra-party opponents, we might be able to get more power.

The current meme running around Left Blogistan that the entire mortgage crisis and the resulting meltdown we are now enduring is because Clinton sided with the Republicans to destroy the FDR era Glass-Steagall Act. Here is an example of exactly the kind of shallow analysis I see all over the blogs. One of my commenters, Potato Head, submitted this comment:

“While I did and do support Hillary, let's not whitewash her husband's role in this disaster, by signing, with no complaint, the legislation repealing Glass-Steagall that helped make this possible.

Bill Clinton's Role in the Mortgage Crisis

Contemporaneous account here.

Maybe, I remember at the time thinking, this isn't going to end well. Maybe Hillary had her own ideas about it, too. But I haven't seen any sign that she differed from Bill about it.”

The first link is to an article written in late 2007, and is simply a hit piece on Clinton. It has incorrect timelines, does not cite a single piece of objective factual reporting on Clinton’s role in the situation, and is heavily larded with innuendo and fundamental misunderstandings of what “subprime” means (more on that later). My favorite piece is a graph that shows the effect of Bill’s “repeal” of Glass-Steagall – two years before the Gramm-Leach-Bliley Act was signed. The second comment link is to a canned AP report repeated in the CNN politics section, where Ralph Nader is quoted as the Democratic voice on the matter. (Thanks, Ralph.) I read these articles (as I do all links embedded in comments) and thought they were woefully short on facts, and thus decided to not publish PH’s comment. I did post a reply saying why I wasn’t going to post the comment and pointing out an alternative view. I got this response:


As I said in my comment, I support Hillary, and in addition to the analysis (by a progressive, I might add), I added a link to a contemporary news account, one of many available I might add, through Google, that showed quite clearly that Bill Clinton did not oppose repeal of Glass-Steagal [sic], or sign it under duress. Nowhere did I say he was entirely at fault. I simply said that he contributed to the disaster. In the real world, things are complicated. I think that's a fair opinion to hold.

But let's say that one can voice an objection to this opinion. For some reason you seem to think that your readers should be spared having to confront evidence that complicates their worldview, and so have elected to frankly censor it.

I am not a troll, and came to your blog back in June because I shared the disgust with Obama's tactics and the liberal blogosphere that the rest of your readers feel. But I can't help but conclude that you really aren't interested in robust debate or diversity of views, any more than, say, DailyKos is. I find that sad. It will certainly make me think twice about bothering with this blog in the future. ”

(Note – I post both of PH’s comments in full so readers can see all of his/her argument without edits. I don’t care what PH says about me personally.) As I told someone recently, I don’t usually bother with commenters who try to hold comment thread arguments with me, but given the prevalence of this particular fallacy in the blogosphere and considering that is going to come bite the party in the ass big time very soon, I’m going to discuss the facts in context and with some attention to how CDS is putting Democrats in a bad position on this issue.

Let’s start by establishing some legislative facts about the Gramm-Leach-Bliley Act (GLBA) of 1999 which is viewed as the repeal of the Glass-Steagall Act of 1933. For basic background, I started here at the Wikipedia entry and followed various links to research the issue. The key paragraph is this one, in the section titled “Congressional history of the Act”:
The bills were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA). The bills were passed by a 54-44 vote along party lines with Republican support in the Senate[1] and by a 343-86 vote in the House of Representatives[2]. Nov 4, 1999: After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill only after Republicans agreed to strengthen provisions of the Community Reinvestment Act and address certain privacy concerns.[3] The final bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. This veto proof legislation was signed into law by President Bill Clinton on November 12, 1999. [4] The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[5]
Here are the key takeaways from that report:
  1. The Republicans controlled the Congress.
  2. There was a significant difference between the original Senate and House versions
  3. The Senate was deeply divided on the original version on a 54-44 party line vote.
  4. The House was not so divided on its version, voting 343-86, so many Democrats voted for it.
  5. The bill went into Conference and it was the Conference Report version that was eventually approved, 90-8-1 in the Senate, basically erasing Democratic opposition, and 362-57-15 in the House, making some small gains in Democratic support.
  6. It was a veto proof vote.
  7. It was signed on November 1999. Bills of this complexity usually take several months to become effective and several years because the implementation needs to be worked out.
I’m going to step back for a moment from the reporting and talk about blogospheric reactions to the mortgage meltdown with how GLBA is being positioned by Left and Right. This is going to be a bit of a detour, but it will make sense later.

On the Left, I’ve seen several attempts to link McCain to Gramm in order to discredit McCain’s economic positions (a good move IMO), but one line of argument goes after GLBA, claiming that there were few differences between the original toxic Senate version and the Conference Report which produced the final legislation. The legislation was therefore fundamentally the same, Phil Gramm is the mastermind behind the subprime mortgage mess and that Bill Clinton is the enabler, not pushing back to keep this from passing. (I guess this is seen, as mentioned obliquely in PH’s first comment, as some sort of legitimate objection to Hillary, which would also come in as a pro-Obama stance.) This is wrong, as will be shown later in this post.

On the Right, they are more than happy to agree that the subprime mess is all Bill Clinton’s fault, but Phil Gramm is the thwarted hero, not the evil instigator. The problem is not with GLBA, but with Bill Clinton’s refusal to agree to roll back the Community Reinvestment Act (CRA) as demanded by Gramm. This meant that the good, upstanding banking industry was forced to make bad subprime loans to minorities, the poor and in bad neighborhoods, which is the cause of the financial sector meltdown. The mortgage bubble was caused by the subprime mess which was caused by Clinton’s insistence on preserving the CRA.

And what is the Community Reinvestment Act that Gramm so frantically wanted to terminate? Back to Wikipedia as a starting point. This 1977 act, intended to fight back against redlining and discriminatory practices by banks against poor and minority neighborhoods and businesses, was updated by Bill Clinton in 1993/94, and which took effect in 1995. He expanded the number and size of loans available to small businesses, and to poor and minority home buyers. It had additional reporting and oversight provisions to ensure banks were complying with lending laws. Finally, he allowed CRA loans, including “subprime”, to be securitized as a way to encourage lending. The financial industry was all for securitization. What they objected to was the regulation of their loan practices:
Critics claim that government policy encouraged the development of the subprime debacle through legislation like the CRA, which in effect forces banks to lend to the same otherwise uncreditworthy consumers they are now being criticized for accepting. [6] [7] Defenders of CRA disagree, pointing out that half of all subprime loans were made by institutions that are not subject to CRA and another substantial share of subprime loans were made by subsidiaries of banks that do not fully come under CRA. They estimate that the substantial number of riskier loans banks were forced to accept by CRA were not enough to be a problem.[8]
There are two things to take away from this. First, the claim that the financial crisis is a result of subprime loans that banks were “forced” to make due to CDRA is a dubious one. No one forced any lender to throw all of their underwriting practices out the window. Second, as Tanta of Calculated Risk tirelessly reminds us the subprime crisis is nothing compared to the Alt-A and prime crisis entering the market now. If you have not had the delight of reading Tanta, here are four excellent posts about the fallacy of “subprime”:
In her post, “We’re All Subprime Now,” Tanta discusses borrowers who are upper middle income and are seeing their “prime” loans go down the toilet. It was her ending statement to this post that set off a huge amount of my own political thinking this year:
Is that, one wonders, what Mr. Doyle thinks is the difference between those subprime people and "us"? That while the subprime people hopelessly bungled their finances for selfish reasons, the prime people hopelessly bungled their finances for unselfish reasons?

I am tempted to say that the real difference between prime and subprime borrowers is that in the former case the denial lasts a lot longer.
Them and us; the bad people who should never have been given loans and us nice people who are just a little down on our luck. Yeah, I think you can see the theme.

To return to our argument, the debate about subprime loans is a red herring offered by Left and Right alike to try to pin blame for the current debacle on someone else. Unfortunately, the Left wants to pin it on a Democrat, moaning and groaning about how Bill didn’t even try to keep this horrible piece of legislation from getting through, and the Republicans are happy to agree. As Potato Head said, “While I did and do support Hillary, let's not whitewash her husband's role in this disaster, by signing, with no complaint, the legislation repealing Glass-Steagall that helped make this possible,” And “[linked to a] a contemporary news account, one of many available I might add, through Google, that showed quite clearly that Bill Clinton did not oppose repeal of Glass-Steagal [sic], or sign it under duress.”

Didn’t even try to oppose it? Didn’t complain? Didn’t sign under duress? Why don’t we go look at one of those contemporaneous reports and see what really happened? I turn not to a short AP-generated political piece, but to an in-depth write up by a New York Times financial reporter (the NYT being no particular friend of Bill Clinton), “ Agreement Reached on Overhaul of U.S. Financial System,” by Stephen Labaton. Here are key paragraphs, but I encourage everyone to click through ands read the whole thing, as it is very informative. My emphasis throughout:

The deal was announced about 2 A.M. after a compromise was reached over the measure's effect on lending rules for the disadvantaged, the source of months of partisan bickering between the White House and Senator Phil Gramm, the Texas Republican who heads the banking committee.

It concludes decades of attempts to rewrite banking laws to catch up with a marketplace that has already experienced broad consolidations and the rise of financial conglomerates offering bank and brokerage accounts as well as insurance. …

While the measure is likely to enjoy broad bipartisan support, it has also been criticized. Some lawmakers and privacy groups say the legislation does not adequately protect consumers and will allow financial companies to share and sell private information about customer accounts. Other critics worry about the further consolidation of the financial services industry. …

The breakthrough in Friday's legislation came in a backroom meeting at the Capitol soon after midnight, when a group of moderate Senate Democrats -- led by Christopher Dodd of Connecticut and Charles E. Schumer of New York -- forced a compromise between Gramm and the White House over the legislation's effect on the Community Reinvestment Act, a 1977 anti-discrimination law intended to encourage lending to minorities and others historically denied access to credit.

Dodd, whose state is home to the nation's largest insurance companies, and Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act. Both men said in interviews Friday that they moved to strike a compromise after it became apparent that the legislation might be killed, as it was last year by Gramm, over the debate about the Community Reinvestment Act. …

But the White House found that provision unacceptable and had its own ideas about community lending. It wanted the legislation to prevent any bank with an unsatisfactory record of making loans to the disadvantaged from expanding into new areas, like insurance or securities. …

When Gramm's measure was defeated by one vote, it quickly became clear that there would be no law unless Gramm could get some Democrats to break from the White House.

But Administration officials had spent all day making sure that the Democrats remained solidly against the measure until their concerns about the Community Reinvestment Act could be worked out.

So what do we see in this contemporaneous report? That the White House had been pushing back on this act for months. That certain Congressional Dems, Dodd and Schumer foremost, explicitly wanted to kill Glass-Steagall. That the White House fought them as well as Gramm on this issue. That the White House rallied Democrats to present a solid front to the measure, requiring that the CRA be protected, which some Congressional Dems were just as happy to toss out along with all other protections.

Think back to earlier in this article when I pointed out what the votes were for this Act. This bill was barely opposed by Congress except for the language in the Senate version to kill the CRA. When Gramm backed down on that, there was overwhelming support. The vote was veto-proof. If Clinton had vetoed it, with a Republican controlled Congress and a majority of Democrats behind it, he would have been very publically rebuked by his own party in the form of an over-ride. It would have given the Republicans another arrow for the “anti-business Democrats” quiver.

Now, remember back to the discussion about the CRA and how long it took after passage to make it effective. The GLBA, a far more complex act, was signed in November of 1999. In 2000, we were looking forward to Gore’s election. This Act would have been implemented under Gore’s supervision, the wonk to beat all wonks. Thus, when Bush took over in 2001, and an entirely new form of financial services industry was charging forward, there was no attempt or interest in providing substantive policies and regulations to prevent exploitation of its provisions. Nope, we were playing by Enron Rules. This Act is the Republicans’ baby, passed with the enthusiastic support of Congressional democrats who would not even have cared about the CRA provisions if Bill Clinton has not told them he would veto it without those protections.

Thus, GLBA was yet another episode in spineless Democrats capitulating to, oh, excuse me, acting in bipartisan accord with greed-head Republicans, and then blaming Clinton for signing what they strongly supported.

The point is not that it was a good or bad act for Clinton to sign. (After all, one of its authors is the enthusiastic Obama-supporting Republicans, Jim Leach. Repeat - GLBA was written by an Obama supporter.) The point is that the obsession with assigning all blame for Democratic failures, real or imagined, to Bill Clinton is a political failure that continues to pay dividends to the Right. Now is the time to be piling this stuff right on top of the Republicans, making it crystal clear that this shitpile is one of their making, crafted by them, overseen by them, encouraged by them, and now to be owned by them. You won’t do that by remaining invested in seeing Bill Clinton as the primary point of failure of Democratic policy and politics, and relegate the rest of the political actors, especially the opposition, into minor roles.

Do you really want to be arguing, this close to the election, that the mortgage meltdown is the Democrats’ fault?



Deep Trunk said...

This is an example of the Lieberman Equivalence Principle: With a few Republicans and all but a few Democrats, you can do a lot of good. With a few Democrats and all but a few Republican, you can do a lot of evil.

Shainzona said...

Well...thank you. You've posted and "explanation" and examination of the facts. (For those of us who are less well equipped to understand these kinds of matters - me - I really appreciate it.)

We have house guests and had a Obama v Clinton "discussion" over dinner last night (it ended with...well, "we will all agree to disagree" and a count to 10 and order for dessert. We didn't want them storming off in the middle of the night.)

But I digress. I am printing your comment and asking them to read it. You made the point with elegance, grace and FACTS.

(Oh, and thanks for Rescue Cat - After LMAO I've sent it spinning through the "tubes" to other kitty lovers).

jangles said...

A. You say in your concluding paragraph that this is a Republican pile. Yet you also say that "spineless Democrats" were all to willing to join in a "bi-partisan" greed assault. It seems to me that this really is a "bi-partisan" mess. The Republicans may have the greater fault but there are a lot of Dems with dirty hands. It seems like if you follow the money, the distribution of $ to Dems like Dodd and Obama light the path.

I really appreciate this research because like most legislative acts the devil is in the details. I was finding myself struggling with the propaganda that it was all Clinton's fault. NQ has a post this am on the role of GS in all of this. As I read that, it occurred to me that this whole financial mess results in GS benefitting from the destruction of most of its competitors pretty much propped up with taxpayer bailout funds. I hope you may be able to enlighten us on that aspect of it in the future.

Anglachel said...


Good point. Readers, you tell me how to acknowledge involvement in legislation without capitulating to the High Broderist claim that "both sides are equally bad".

The Democrats have to figure this out if they don't want to go the way of the Whigs.


Anonymous said...

I honestly don't think the Democrats can. They've been going along for so long, that it appears wired into their DNA and it will take a lot of self-awareness for them to be able to override it.

Thank you for this article. It is helping me to wrap my brain around what is obviously a complicated subject.

The most frustrating part for me is the five-year-old behavior of our pols: finger-pointing and whining.

Chinaberry Turtle said...


the problem w/ many Obamatrons is that they're young twenty-something kids that have grown up with the Internet. Their idea of "good research" is punching in a search phrase in a search engine and looking at what comes up on top. If a large number of links say X, then X must be true, regardless of the quality of the underlying source.

For those of us old enough to have grown up with book-based research, we have an intuitive grasp of how fundamentally flawed this research methodology is that the little Internet kiddies just don't understand. When you picked up a book, magazine, periodical you were immediately clued into some surface indicators of quality. Are there teens in bikinis on the cover? Is the book leather bound? Is there an edition number on the spine? What does the reference librarian think about the source? (she's a paid professional to know such things and her opinion is very valuable).

But all of this is lost on these new Internet kiddies for whom the first page of a Google search is the end-all be-all.

Thank you for the high quality, old-school research exhibited in this post. You keep on proving that this blog is a trustworthy resource of political insight.

Anonymous said...

It's possible to blame FDR, for example, for everything that happened after him. This may include the current crisis. As a matter of fact, Republican have been fighting FDR for decades.

Only the CDS allowed them to make Clinton a proper replacement for FDR Republican hate.

Logically, and I find the analysis in the post a little unrealistic, one cannot blame Bill Clinton for the CRA and the current crisis, because he had no control over regulation and enforcement in the last 8 years. Assuming that reality doesn't exist and everything is a logical consequence of previous isolated steps will not be accepted by any continuous observer of political life.

There is absolutely no doubt that the CRA could have been applied correctly with only minor side effects. Blaming Bill Clinton is simply CDS. Doing it by Democrats is suicide.

Mike J. said...

The irony of the situation (although tragedy might be a better word) is that Obama is far, far worse in this respect than Bill or Hillary Clinton. It's as if they are blaming all the failings of Congressional Democrats on Bill Clinton. And, moreover, they are not realizing that these failings are qualities they view as virtues when displayed by Obama.

Sometimes I find myself hoping for an Obama win solely for the purpose of observing the ensuing disenchantment and disillusionment. That might be the sort of cathartic event the Democrats appear to be in dire need of, because otherwise they may never get their act together.

marirebel said...

I do not think that the repeal of Glass-Steagall, or any other act of Bill Clinton alone, are, without more, causes of the current financial crisis. At the time of the repeal of Glass-Steagall, the financial institutions industry was rapidly changing. Already, the distinctions between credit, investment and insurance products were blurred, and the industry was taking advantage of legislative and regulatory loopholes to acquire insurance and other non-banking entities. Repeal of Glass-Steagall formalized legislatively what was already underway (and what had been underway for some time), and may have allowed financial institutions to better compete with other types of corporate entities.

Lack of good regulatory oversight led to the current financial crisis, just like lack of adequate regulatory oversight and action led to the S&L debacle. There are places where strong government regulation is required—in the financial and securities industries, and places where the government needs to let go—get out of my body and out of the issue of my personal use of contraceptives. In recent history, the Republicans have always led the call for lax regulation, except when it comes to controlling women’s bodies, and the bodies of those seeking to end painful terminal illness or invasive and extraordinary life support. The Democrats have complied with the Republicans because they are unwilling to stand-up to the corporate elites who fund things like their AT&T/Invesco Field extravaganzas.

salmonrising said...

In the flood of excellent posts here and elsewhere over the past few days I had missed reading this one...H/T to RD's link for correcting my oversight.

And thanks to you for the passion and discipline to follow the relevant breadcrumbs on Clinton's role in Glass Steagall. I myself am guilty of accepting at face value what I had digested on this subject. My source had been Kevin Phillip's book "Bad Money" which castigated the Republicans but also came down fairly hard on Clinton. Since I have high regard for Phillips, I investigated no further. And so I posted somewhere that Clinton shared the blame for this mess. Your citation of relevant data makes it clear that this was not what went down.
My bad.

(If I have time I'll also go back and listen to the video of Bill Moyers interviewing Phillips this past Friday Sept. 21st. I think Phillips again used repeal of Glass Steagall as an example of Clinton's involvement in the genesis of the current mess.)

Anglachel said...

Hi folks,

Thanks for the comments. I do want to be clear that I am not *approving* of any Democratic vote for the repeal of Glass-Steagall, not Dodd's, not the Big Dog's. GLBA was a big wet kiss to the financial industry with nowhere near enough protections for ordinary consumers and borrowers. They should have fought tooth and nail for every concession, then refused to vote for the damn thing, giving Clinton a bill he could veto.

In the end, something was needed to try to corral what was a shadow banking system busily growing without any regulation or oversight. GLBA was *not* that act, as shown by the results. This put the Dems who gave a damn into a bad position - refuse to engage at all and not have any voice in the crafting, or jump in and try to revise, which makes them complicit in whatever sausage comes out the other end.

What I am trying to do is shove back on the bullshit argument that *any* engagement with the shit the Republicans are shoveling somehow means the Democrats are more responsible for the outcome than the Republicans - even when the Republicans control the entire government. I focus on Clinton becuse he is the person most often singled out for this treatment from all sides. The Left has to learn *not* to demonize its own people just to get approval from the David Broders of this world.

They have to stand up for themselves *as a party* (which is why I am disgusted at The Precious for running away from being called a Democrat - if you are so ashamed of the brand you don't want to be called one, get the fuck off my party's ticket), say they are not going to be bullied, and stop being afraid of being seen as obstructionist. They also have to stand up for something worth defending, which is a parallel problem.

When in power, lead. When not in power, oppose. That's how the Republicans do it.


Unknown said...

Joining the Republican Congress was easy for the Democrats who are closer to the Republicans than one would suspect. 1993 was the year to get the health care that was the dream of all Democrats since FDR, but the Democratic Congress abandoned Bill for their lobbyists. In the end the party and the people lost.

I've come to the conclusion that not one of the policies Obama is running on will be followed or enacted. When the elders of the party abandoned Hillary, it also abandoned its main constituency. This is the last time I will forgive the party for abandoning me. I'm voting for McCain.