hilzoy

by hilzoy

Ezra is absolutely right to say that our failure to respond in any coherent way to the economic crisis is a deep political failure:

“This is a failure of politics. Like with global warming, with health care, with the national debt, with immigration. It is further proof that we have a calcified political system incapable of responding to either long-term threats or short-term crises. The electoral and partisan incentives have made actual action too dangerous and rendered obstruction everyone’s easy second choice. And in politics, you just about never get your first choice. And so the Republicans killed this bill. Without their cover, the Democrats couldn’t save it, because politically, they couldn’t take ownership of it.

It’s easy enough to imagine a society running atop a stable economy even when it has an unhealthy politics. And it’s simple enough to see how an unstable economy can be calmed through concerted action by an effective political structure. But an economy in chaos and a political system in paralysis? What happens then?”

Good question. Our dysfunctional politics places some good options off the table, makes others much more difficult to implement than they would be otherwise, and prevents us from adopting those decent options that remain to us. Consider, for instance, Brad DeLong’s suggestion that we “go for the Swedish plan.” I think that if we can’t get a bill passed this week, we should do exactly that. But it would be a lot harder to implement here than it would there, and not just because our problems are much larger, and in certain ways more complicated.

More below the fold.

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by hilzoy

Having gone over McCain and Obama’s legislation on banking and mortgage reform, I thought I’d continue my search for John McCain, Scourge Of Wall Street by looking at his website to see what new regulations he proposes for financial institutions. As far as I can tell, though, not only is there nothing in his issues section that spells that out, there’s nothing that so much as mentions any aspect of the present crisis other than the need to help homeowners in foreclosure. As far as his position papers are concerned, the financial crisis, like foreign policy, simply doesn’t exist.

So I decided to check out the various speeches McCain has given on the economy during this campaign, to see how his career as a financial reformer might have manifested itself in them. On March 25, he gave a speech on the housing crisis. Given his recent claims to be a champion of tighter regulation on Wall Street, you might expect that he would have called for new regulations back in March. Au contraire: while he did call for more transparency in lending, here’s what he said about regulating financial institutions:

“In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.”

That’s right: we need fewer regulations on financial institutions. How prescient!

McCain gave a speech on the economy on April 10: he did not mention any reforms of financial institutions, though he did call for “an immediate DOJ task force to aggressively investigate potential criminal wrongdoing in the mortgage lending and securitization industry.” On April 15, he gave a speech on the economy. For the most part, he focussed on tax cuts, restraining spending, and trade deals. Here’s the sum total of his remarks on reforming financial institutions:

“It’s important as well to remember that the foolish risk-taking of lenders, investment banks, and others that led to these troubles don’t reflect our free market as it should be working. In a free market, there must be transparency, accountability, and personal and corporate responsibility. The housing crisis came about because these standards collapsed — and, as president, I intend to restore them.”

On April 22, McCain actually mentioned the need to reform Wall Street. Unfortunately, he didn’t say much about it: “Reckless conduct and the abuse of power must be called to account — on Wall Street, in Washington, or any place else. And I have a few ideas about Washington in particular. (…)” On May 15, McCain gave a speech on his vision for America four years from now. The section on the economy focussed entirely on tax cuts, eliminating earmarks, trade agreements, and employee retraining. As he imagined himself looking back over four years of his Presidency, the housing crisis and the reform of financial institutions didn’t even rate a mention.

On May 19th he gave another economic address in which the housing and financial crisis is not mentioned. One paragraph starts out promisingly enough, but doesn’t follow through:

“Serious reform is also needed to help American companies compete in the world economy. I have proposed a reduction in the corporate tax rate (…)”

On June 10, McCain actually mentioned the need for corporate reform. Unfortunately, the only specifics he gave concerned executive compensation and the need for vigorous prosecution of existing laws:

“In times of hardship and distress, we should be more vigilant than ever in holding corporate abuses to account, as in the case of the housing market. Americans are right to be offended when the extravagant salaries and severance deals of CEO’s — in some cases, the very same CEO’s who helped to bring on these market troubles — bear no relation to the success of the company or the wishes of shareholders. Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while the offenders themselves are packed off with another forty – or fifty million for the road.

If I am elected president, I intend to see that wrongdoing of this kind is called to account by federal prosecutors. And under my reforms, all aspects of a CEO’s pay, including any severance arrangements, must be approved by shareholders”

McCain’s July 7 speech on job creation didn’t mention the subprime crisis or the need to reform Wall Street. Likewise, in a speech on July 9 that was largely devoted to the economy, McCain didn’t mention the subprime crisis at all.

Last Friday, McCain finally got around to giving a speech about the need to reform financial institutions, and offered some actual specifics. I encourage you to read it.

I’d also encourage you to read several speeches by Barack Obama, for the sake of comparison. First, there’s his NASDAQ speech from September 2007, in which he addresses the subprime crisis, and explains, a full year before McCain got around to it, what happened, why we need reforms not just in the mortgage industry but in financial institution, and what they should be. A prescient bit from that speech:

“Markets can’t thrive without the trust of investors and the public. At a most basic level, capital markets work by steering capital to the place where it is most productive. Without transparency, that cannot happen. If the information is flawed, if there is fraud, or if the risks facing financial institutions are not fully disclosed, people stop investing because they fear they’re being had. When the public trust is abused badly enough, it can bring financial markets to their knees.”

Second, there’s Obama’s speech from March 27, 2008, in which, at a time when John McCain was still calling for financial deregulation, he was not only proposing new regulations to prevent the abuses that led to the present crisis, but laying out six guiding principles that he would follow in creating them. To this day, John McCain has not gotten nearly that specific.

Obama has many more speeches on the economy. I haven’t bothered to go through them all, as I did with McCain’s, since the two I’ve mentioned are more specific, and much earlier, than anything McCain has offered.

Why do I bother? Because lies annoy me. And the idea that John McCain is some kind of Wall Street reformer is a lie.

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by hilzoy

John McCain, via MSNBC:

“The crisis on Wall Street, my friends, started in the Washington culture of lobbying and influence pedaling and he was right square in the middle of it,” McCain said, painting Obama as a Washington insider. “My friends, this is the problem in Washington. People like Sen. Obama have been too busy gaming the system and haven’t ever done a thing to actually challenge the system. That’s not country first, that’s Obama first.”

Since I don’t feel like engaging with McCain’s Norma Desmond moments just now, I won’t say anything about his saying “that’s not country first, that’s Obama first”, beyond agreeing with Steve Benen: no one who puts Sarah Palin on his ticket has any right to lecture anyone about putting country before ambition. And Steve and others have already noted the absurdity of McCain, of all people, railing against “the Washington culture of lobbying and influence peddling”. I do want to make on points about the rest of this, though.

The heart of McCain’s argument is that he is a reformer who tried to take on the corruption in the mortgage and banking system, while Obama stood on the sidelines doing nothing. This is not true. The NYT:

“[McCain’s] record on the issue, and the views of those he has always cited as his most influential advisers, suggest that he has never departed in any major way from his party’s embrace of deregulation and relying more on market forces than on the government to exert discipline.

While Mr. McCain has cited the need for additional oversight when it comes to specific situations, like the mortgage problems behind the current shocks on Wall Street, he has consistently characterized himself as fundamentally a deregulator and he has no history prior to the presidential campaign of advocating steps to tighten standards on investment firms.”

The Washington Post:

“A decade ago, Sen. John McCain embraced legislation to broadly deregulate the banking and insurance industries, helping to sweep aside a thicket of rules established over decades in favor of a less restricted financial marketplace that proponents said would result in greater economic growth.

Now, as the Bush administration scrambles to prevent the collapse of the American International Group (AIG), the nation’s largest insurance company, and stabilize a tumultuous Wall Street, the Republican presidential nominee is scrambling to recast himself as a champion of regulation to end “reckless conduct, corruption and unbridled greed” on Wall Street. (…)

McCain has not always opposed government regulation. He supported efforts to allow the Food and Drug Administration to regulate tobacco. And he pushed to strengthen the Sarbanes-Oxley Act requirements, which were put in place after the accounting scandals involving Enron and other major firms.

But he has usually reverted to the role of an unabashed deregulator. In 2007, he told a group of bloggers on a conference call that he regretted his vote on the Sarbanes-Oxley bill, which has been castigated by many executives as too heavy-handed.

In the 1990s, he backed an unsuccessful effort to create a moratorium on all new government regulation. And in 1996, he was one of only five senators to oppose a comprehensive telecommunications act, saying it did not go far enough in deregulating the industry.

As chairman of the Senate Commerce Committee for more than a decade, McCain did not have direct oversight of the financial sector. But he sat at the center of arguments between telephone, cable and satellite companies, almost always pressing for more competition.

“I’m always for less regulation,” he told the Wall Street Journal in March. He added: “I’d like to see a lot of the unnecessary government regulations eliminated.””

In making his case, McCain relies on his 2005 co-sponsorship of S. 190, which would have improved oversight of Fannie Mae and Freddie Mac. While I think McCain is wrong to say that “the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac” were “at the center of the problem”, McCain was right to try to get stronger oversight in place. However, that bill died. According to Mike Oxley, the Republican Congressman who wrote it:

“Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.” (Emphasis added.)

There’s a reason McCain relies so heavily on his co-sponsorship of this bill: it’s the only bill he has sponsored or co-sponsored during the last two Congresses that has anything to do with mortgage or banking reform. You can gauge the depth of his concern for this issue by the fact that in 2008, when a bill establishing tougher oversight over Fannie Mae and Freddie Mac did make it to the floor of the Senate, John McCain didn’t bother to show up for the vote. (Neither did Barack Obama.)

During those same four years, Obama introduced legislation to prevent mortgage fraud. He also co-sponsored a number of bills directed at abusive mortgage practices, including one that would, among a lot of other things, have required subprime lenders to document borrowers’ ability to pay, thereby making “liar loans” illegal, and another that called for licensing of mortgage originators.

I’ve put the full list of bills related to banking and mortgage reform sponsored or co-sponsored by Obama and McCain during the last two Congresses below the fold, so that you can judge the two candidates’ records for yourselves.

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by hilzoy

Continuing (and, mercifully, ending) the comparisons made in my last two posts: McCain’s and Obama’s co-sponsored legislation that was passed in the 109th Congress. Criteria, caveats, etc., are the same as before: only bills that McCain and Obama co-sponsored at the earliest opportunity, no purely ceremonial legislation; no legislation that just calls for a report or expresses the sense of the Senate; no legislation that appropriates less than $40 million, and does nothing else; no legislation of purely local interest. The list is below the fold.

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by hilzoy

Earlier today I posted a list of the bills and amendments sponsored by either John McCain or Barack Obama that were enacted into law. In this installment, I list the bills and amendments that they co-sponsored that were passed in the 110th Congress. (The 109th is coming later.)

Co-sponsorship is tricky. On the one hand, it’s worth including, since each bill only gets to have one lead sponsor, and often more than one Senator does significant work on it. Bills like Nunn-Lugar and McCain-Feingold are named after two Senators for a reason, but each had only one lead sponsor. This means that looking only at sponsored legislation leaves out important work that Senators have done. On the other hand, co-sponsorship is no guarantee that a Senator has done significant work: they might just sign on because they like the bill. I have tried to correct for this as much as possible: I have counted only bills that McCain and Obama signed onto at the earliest possible moment, and in the case of amendments, I went to the Congressional Record to see whether they were listed as co-sponsors when the amendment was introduced. This rules out bills and amendments that they clearly signed onto after the fact. On the other hand, it undoubtedly includes legislation that they did not actually help draft. I’ve listed the number of original co-sponsors for each bill/amendment: a bill with two original co-sponsors is more likely to reflect those co-sponsors’ work than one with fifty. Nonetheless, this list undoubtedly includes too much; I don’t know how to rectify that.

As before, I have omitted the following: (a) bills that just do something ceremonial, like name a post office; (b) bills that merely call for a report or express the sense of the Senate (too easy to mean anything); (c) bills that appropriate less than $40 million, and that do nothing else; (d) bills of purely local interest. I got lazier on two counts: first, when it wasn’t obvious, I did not check the amendments to make sure that they appropriated more than $40 million. (I.e., when an amendment struck a section of an existing bill and replaced it with an appropriation of more than $40 million, I did not check the underlying bill to make sure that the difference between the two was, in fact, over $40 million.) Second, I stopped checking to see whether amendments’ underlying bills were passed. (There were just too many of them.)

The list is below the fold.

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