Republicans, deregulation, and the current financial mess

By Nancy Jane Moore

Has anybody else noticed that three major financial crises -- ones brought on by excess, greed, and, most importantly, insufficient oversight -- came during Republican administrations?

I'm speaking of the Great Depression, the savings and loan crash of the 1980s, and the current mess, which, according to what Kevin Phillips said on Bill Moyers Journal last night, might be worse than the Depression. (I'm paraphrasing from vague memory -- Phillips' pessimism scared me so much that I couldn't stand to watch and switched to a DVD of Battlestar Gallactica instead of listening to him as I should have.)

These three crises happened after years of administrations that opposed regulation, took steps to deregulate institutions that cry out for regulation, and appointed people as regulators who oppose the whole idea of oversight.

I know there have been other crises in recent times, but most of the others strike me more as the usual ups and downs of a market-based economy. These three, though, came about because the administrations did what they could to block regulation, allowing as so-called unfettered market.

As near as I can tell, all an unfettered market does is allow people to make money doing things that provide nothing to the economy as a whole -- such as creating hedge funds and other financial instruments most ordinary people can't comprehend -- and to get insanely rich, until the whole thing crashes, at which point we the taxpayers bail them out so that our economy doesn't go down with them.

The Depression came about after the corrupt years of Harding following by Silent Cal Coolidge and Herbert Hoover, neither of whom did anything to get in the way of their money-making pals. It took a long time to rebuild after that, but rebuild we did, with increased regulation and protection for ordinary citizens. There were ups and downs after that, but on the whole, the economy did pretty well.

And then Reagan came along with his deregulation ideas, which were followed by the crash of the high-flying, over-extended, deregulated savings and loans. As crashes go, this one may seem like a blip, except that it so exactly presaged what we're seeing now.

At least I understood what happened with the savings and loans. I don't really comprehend the financial side of how the investment banks got into all this trouble -- and I actually do know something about real estate financing. The most obvious thing to me -- especially given that the ratings organizations continued to rate investments in and by these firms at the highest levels -- is that everybody took care of everybody else and nobody paid attention to the fact that housing prices couldn't go up forever.

I'm currently reading Naomi Klein's The Shock Doctrine, in which she explains Milton Friedman and his argument for completely free markets, and points out how "shocks" -- both economic and political -- paved the way for other countries to try his methods. By rights, here in the land of Friedman, we shouldn't bail these companies out, but just let them fail and our economy with them. Supposedly our society would end up better off, never mind how many of us might suffer.

Of course, even Republicans don't do that. With luck, along with this massive bailout we'll get some revived and even improved regulation.

Though as Klein warns us, don't think you've seen the death knell of the "free market uber alles" argument. It'll be back as soon as we get things put back together and it could screw up the other things we need to deal with, like climate change for example.

Given the depth of the crisis, many of us may not live to see the next round.

Here's another suggestion for something we can do -- besides voting Democratic this time and making sure Congress actually passes some meaty regulatory schemes: Lobby the high schools to teach economics. Make it a required course, just like civics and history. Given the complexities of modern finance, everyone needs at least a basic grounding in how economic systems work.

Used to be everyone needed to know how to raise food, build houses, cook, and sew. These days, what everyone really needs to know is how to manage their own money -- and how to control those who manage vast amounts of it.

SEX! Now that I've got your attention ...

By Nancy Jane Moore

It seems we have a new sex scandal brewing in official Washington, D.C. A woman has been charged with running a high-class call-girl operation (i.e., one aimed at upper class men). A deputy secretary of state has already resigned.

The so-called "Washington Madam" says it was just an escort service with massages. Her girls (who apparently included women in their 50s) didn't have sex with the clients. If you believe that, I'd like to offer you a great deal on that bridge in Brooklyn.

ABC News is all over this story. They're interviewing the madam on 20/20 tonight. Apparently they have her client list and plan to divulge some names -- though I don't know whether that's on 20/20 or on their regular news program. If you care, watch both.

Frankly, I don't care. Oh, it says something about the inherent sexism of our society if powerful men prefer the pretense that comes from hiring a woman -- whether as arm candy or for sex -- to the messy nature of actual relationships. And given that the current administration is given to religious self-righteousness about sex, it's amusing to catch some of their people with their pants down.

But I doubt there's really much going on here that affects the security of the country or even the running of the government. The real scandal of this administration isn't who's screwing who; it's the growing gap between rich and poor, the incompetent handling of key governmental responsibilities like disaster relief, the full-scale assault on our civil liberties, and -- most importantly -- an unnecessary and unsuccessful war that has sacrificed a significant percentage of our armed forces and only made our country more vulnerable.

The sex scandal isn't dominating the airwaves and front pages yet, but I fear that it will. Washington loves a sex scandal -- witness all the nonsense over Bill Clinton's games with his intern. Since this will be a Republican sex scandal, it allows the press to feel all self-righteous about covering it. After all, this scandal makes it tit for tat between the parties, and that's what passes for objectivity way too often.

I hope I'm wrong. The media have finally begun to take on the real failures of the Bush administration after years of inaction. Bill Moyers reported on the media's failures thoroughly in "Buying the War," the first broadcast of his new PBS program, Bill Moyers Journal. But the coverage of late has been significantly better. I'd hate to see good reporters get sidetracked by a garden-variety sex scandal.