Charles W. Calomiris, professor of finance and economics at Columbia Business School, and Peter J. Wallison, a general counsel in the Reagan administration Treasury Department, believe the current financial meltdown could have been avoided. They take to the Wall Street Journal to explain.
In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years. In contrast, Sen. Obama's conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo. The first head of Mr. Obama's vice-presidential search committee, Jim Johnson, a former chairman of Fannie Mae, was the one who announced Fannie's original affordable-housing program in 1991 -- just as Congress was taking up the first GSE regulatory legislation.
In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.
[...]
If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.
"In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible"
Now that's hilarious.
Somehow we went from McCain on Monday (the 15th) saying that "the fundamentals of the economy are strong" to Hank Paulson saying a couple days later that the economy was on the
"verge of collapse".
On Tuesday, McCain wanted to form a "commission" of some kind...also on Tuesday (the 16th) that AIG should NOT get a bailout to Yes! AIG needs to be bailed out!
McCain was all over the map
George Will has an excellent column which really characterizes the Hobbesian nature of this election.
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/22/AR2008092202583.html
Exactly why, as each day passes, I grow ever more happy with my decision to vote for NEITHER of the major-party candidates.
A pox on both their houses.
Posted by: Smithington | September 23, 2008 at 12:25 PM