In article ,
bud-- wrote:


The last president that balanced the budget was .... let me see....musta
been a long time ago...Clinton. Bush 2 inherited a surplus that was
paying down the national debt. Didn't last long.


Revisionist history. The surplus had peaked by FY 2000 and was almost
gone by FY 2001 (starting a full month before the election). So Bush did
not inherit a surplus and there is nothing to indicate that the debt got
paid off. Clinton just happened to be around during the Greenspan-Gates
bubble (Greenspan for the large length of time with easy money, and
Gates as a proxy for the great (one-time) changes in productivity
brought about by computers.




And in the recent past, we had the savings and loan debacle, which was
about
as regulated an industry as you can get.

That's pretty funny. Deregulation of S&Ls was a major cause. Most
deregulation was under Reagan.
Nope. There were three major tides in the S&L. The first was during
the inflation before the regulators (mostly Dem at the time) got around
to letting S&Ls do things to balance the fact that before they had to
loan long term for mortgages, but got their money most short term. WHen
inflation took off S&L were saddled (by regulation) with income from
long term mortgages that were nowhere near the interest rate needed to
pay out what they needed to in interest.
Second was when Congress screwed around with taxes (big surprise
there). There were some major building projects that had been made
"viable" by tax rules, they were more or less shelters. The tax laws
were changed retroactive, and all of a sudden these project were no
longer viable on paper. (So, two debates, whether Congress should have
played with tax laws and whether banks should have loaned based on tax
related issues instead of actual economics).
The third wave was when Congress played with the rules again and
again retroactively. In order to get good S&Ls to pick up bad ones, the
appropriate regulators came up with "regulatory good will." This was an
asset that the acquiring banks could use to offset some of the bad loans
that they were taking on at the behest of the Government. Otherwise, the
acquiring bank couldn't take the bad loans and stay solvent. Essentially
the regulators said "We know you did not make this bad bet and since we
appreciate your taking it (and the bad S&L) off your hands, we won't
punish you.
Congress later came around legislated the ending of regulatory
goodwill and put a whole bunch of S&Ls out of business literally
overnight. BTW: A whole line of cases where the courts said that
Congress did indeed change the deal the federal government had made,
that they had no right to, and that the S&Ls closed were owed billions
of dollars in damages.


There was also inadequate supervision by regulators, and in some cases
political interference. A famous one involved McCain (don't remember who
else, but also democarats).
McCain was the only GOP member of the Keating Five, he was the only
one of the five who agreed to testify for the plaintiffs in the ensuing
civil trials. The Ethics Committee ruled that the involvement of McCain
(and in the spirit of full disclosure- John Glenn) in the scheme was
also minimal, and he too was cleared of all charges against him.


Some major causes of the crash:
- Repeal of Glass-Steagall, which kept previously kept banks, investment
houses and insurance companies as separate entities. This came out of
the Great Depression. Apparently we forgot its lessons. Repealed 1999
largely on the efforts of Phil Gramm (signed by Clinton).

Passed Congress (as required) by large (bipartisan0 votes in both
Houses. 90-8 in the Senate and 362 to 7 in the House (BTW: of the people
currently pontificating on how bad the bill was, only Barney Franks
voted against (and did so in the House Committee, and the first House
vote). Pelosi and Reid both voted to pass.
BTW: If you go look at most of the bills that people point to, the
same voting pattern holds. That idiot econ columnist for the New York
Times tried to put it all on Reagan (big surpirse there, not) pointing
to the repeal of some law (forget which one). At the time, I went to
Thomas.gov and looked it up. It passed with only 5 dissenting votes in
the House (Barney Frank again, I don;t like the man's politics, but you
have to admire his steadfastness to his ideals). It was passed by
unanimous acclimation in the Senate.

- Ban on regulating derivatives. Snuck into an appropriation bill by
Phil Gramm.
Yes those Evil Republicans once again "sneaking" things passed the
Dems. Just read the damn things or shut up (and that goes for both sides
of the aisle).



Greenspan was also strongly opposed to regulating derivatives. (So was
Summers.).

Bipartisan agreement (grin)


So, maybe you have not learned and still believe in "self regulating
markets".

But the record is also ripe with indications that governments manage
to mess it as bad.

--
"Even I realized that money was to politicians what the ecalyptus tree is to koala bears: food, water, shelter and something to crap on."
---PJ O'Rourke