With the near collapse of financial markets, Capitol Hill is awash in a fresh debate over who supported what and when and whether it was the right thing to do at the time.
The blame game has ensnared leaders from both parties, the White House, and presidential candidate Sen. John McCain (R-Ariz.) as various sides attempt to explain whether it was Congress deregulation of the financial markets or Bush administration regulators who are at fault.
For Sen. Byron Dorgan (D-N.D.), its both. When Congress was passing its landmark deregulation of the banking, insurance and securities industries in 1999, Dorgan was one of the few naysayers.
We will, in 10 years time, look back and say, We should not have done that because we forgot the lessons of the past. Those lessons represent timeless truths that were as true in the year 2000 or 2010 as they were in the year 1930 or 1935, Dorgan said nine years ago on the Senate floor.
Similarly, House Commerce Chairman John Dingell (D-Mich.), who served as ranking member in 1999, predicted the situation the government faces today, as the Federal Reserve and the Treasury move aggressively to shore up troubled financial markets.
Taxpayers are going to be called upon to cure the failures we are creating tonight, Dingell warned in 1999. It is going to cost a lot of money, and it is coming. Just be prepared for those events. You are going to find that they are too big to fail, so the Fed is going to be in and other Federal agencies are going to be in to bail them out. Just expect that.
Hailed by Members of both parties as a much-needed end to burdensome Depression-era regulations, the so-called Gramm-Leach-Bliley law removed barriers between banks, insurance companies and securities firms so they could merge into financial conglomerates.
Dorgan now says a toxic combination of lax oversight and mega-mergers allowed by Gramm-Leach-Bliley bill cleared the way for the current crisis.
The problem is [the bill] connected what needs to be safe and secure, which is what banking needs, with securities and insurance, Dorgan said Friday. Had there been better regulation, I still think we would have run into trouble, but I dont think it would be as serious as it is.
Its relatively easy for Dorgan and Dingell to say, I told you so. Dorgan was one of just eight Senators who voted against the final bill in 1999, while Dingell was joined by only 56 others in the House in opposition.
Notably, current House Financial Services Chairman Barney Frank (D-Mass.) and House Oversight and Government Reform Chairman Henry Waxman (D-Calif.) also voted against the measure because they felt it did not go far enough in protecting consumers. Frank, however, supported the overall goal of the bill. Only five House Republicans, along with Sen. Richard Shelby (R-Ala.), opposed the measure, citing a lack of privacy protections for consumers.
All the current leaders in the House and Senate who were in Congress at the time supported the measure in its final form. And President Clinton signed the bill into law.
But with the current financial crisis, Senate Majority Leader Harry Reid (D-Nev.) said last week that it might be time to take a hard look at it. Repeal it or change it.
Reid and Democrats drew attention to their own support for the measure by playing up the link between McCain and one of the principle architects of that law, former Sen. Phil Gramm (R-Texas).
Last Tuesday, Reid criticized McCains choice of Gramm as a campaign economic adviser, saying Gramm was responsible for the deregulation in the financial services industries that paved the way for much of this crisis to occur. Gramm no longer advises McCain.
Reid spent much of last week refocusing his criticism on the Bush administration, once it became clear he had voted for the measure along with McCain and Gramm.
Pressed by a reporter on Thursday, Reid explained that he originally voted against the bill because it did not contain language requiring banks to lend in underserved and poor communities. He said he supported it once that issue was resolved. Thats the reason most Democrats cited for joining a majority of Republicans in passing the bill.
There were regulations put in place, but this administration — the Bush administration hates government, Reid said. So anything you connect with government they want to avoid.
Its a theme of Democratic leaders in regard to the Wall Street meltdown.
You know that much of this happened because of lack of regulation, lack of oversight in terms of the administration making sure that these financial institutions were capitalized as they took risks, Speaker Nancy Pelosi (D-Calif.) said Thursday. Democrats support the free market, and we want to encourage the markets. But it’s not a free market when you can run wild, anything goes, privatize the gain, nationalize the risk, and when you fail, the middle class bails you out. It’s just not fair. It’s just not right.
And rather than highlighting Gramm, Democratic leaders have shifted to more subtly pointing to McCain as an advocate of deregulation, noting he said earlier this year that he is fundamentally a deregulator.
What a sad boast, especially in light of the consequences of that deregulation, Pelosi said.
Melissa Attias contributed to this report.