Archive for October, 2009

Recession: Blame it on the Republicans

October 28, 2009

By David Farside

Oct. 27, 2009

When former President Bill Clinton left office, we had a national budget surplus of $127 billion. After eight years of Republican fiscal policies and policing the world, former President George W. Bush left office with a $455 billion deficit. And because of the Bush administration’s failed strategies, both militarily and economically, we are now facing a projected budget deficit in 2010 of $1.3 trillion.

A good example of Bush’s failed policy was released last month in a research paper prepared by the University of North Carolina Center for Community Capital. It points the blame for our current economic crisis squarely on Bush and his administration, reporting that Bush blocked any attempt by state governments to prevent predatory lending policies and resulting in mortgage foreclosures and bank failures.

In 2004, the Office of the Comptroller of Currency, a relatively unknown federal agency formed in the days of the Civil War in charge of maintaining the fiscal solvency of our banks, not destroying it, used its power to override state laws prohibiting predatory lending. The state of New York joined other attorneys general and sued the government to maintain its state’s rights.

In a Feb. 8, 2008, letter titled “Predatory Lenders’ Partner in Crime” published in the Washington Post, the governor of New York, Eliot Spitzer, accused Bush of complicity in the bank failures. He said, “The Bush administration looked the other way and did nothing to protect the American people.”

He also added, “They chose to align themselves with the banks that were victimizing consumers.”

Why should that be a shock? The Republicans have always aligned themselves with banks and corporate giants, regardless of their fairness, honesty or integrity.

He wrote that some lending institutions were misrepresenting the terms of the loans and making loans and not caring about the lenders’ ability to repay the debt. He accused the lenders of deceptive teaser rates that later increased “astronomically.” He warned that it threatened our financial market. He was right; it did and now the banks are laughing all the way to Wall Street.

This summer, the U.S. Supreme Court ruled that the federal bank regulatory agency erred in its efforts to prevent New York and other states to protect themselves from predatory mortgage lending. Justice Antonin Scalia, a staunch conservative jurist appointed by former President Ronald Reagan in 1986, joined the court’s four liberal judges and actually wrote the majority opinion criticizing the Bush administration.

Unfortunately for Spitzer, he was caught in a prostitution sting, was identified as client No. 9 on a list of male clients and resigned as governor of New York effective March 12, 2008.

Further evidence of Bush’s failure and how he could have helped the American consumer indicates that the states that did have tighter regulations on mortgage lending had fewer foreclosures. So much for Republican arguments for decreased regulation of the rich at the expense of the middle class.

But the cycle of economic recession and depressions are not anything new to our capitalistic economy. History proves that regardless of Republican blunders, there is always a Democrat waiting to clean up the political mess.

On Oct. 22, 1933, former President Franklin Roosevelt, a Democrat, addressed the nation on the financial crisis in America. At the time, our population was 125 million and between 10 million and 15 million people were unemployed. That number is somewhat deceptive because at the time, child labor was legal and factored in the statistic. The run on the banks caused more than 10,000 bank failures. With the majority of our financial institutions closing their doors, what little savings the American people had were lost. Our dollar was relatively worthless and the commodity index was at record bottom.

But Roosevelt had a stimulus package of his own. He committed $1 billion to repay lost savings and rebuilt the banking system. The Federal Deposit Insurance Corp. was formed, insuring saving deposits up to $2,500. In 1935, a bill was passed establishing Social Security. It was known as the Old Age, Survivors and Disability Insurance program, fashioned after Great Britain and northern Ireland’s pension system in effect since 1908. We were only 27 years behind the times. Realistically, we can’t blame the Republicans for that.

Historically, it was the Great Depression that ended child labor in the United States.

In 1938, Roosevelt signed the Fair Labor Standards Act. By doing so, he created jobs for the unemployed and established a fair minimum wage for blue-collar workers. Prior to the new legislation, working men with families could not compete with the hourly starvation wages paid to children. Without a minimum wage, some men who couldn’t find work were willing to work for children’s wages of less than 25 cents an hour.

Because of our economic failure in the 1930s, the Democratic leadership established new laws protecting our children from corporate predators. We created new banking regulations that, if it weren’t for Bush, would have insulated us from our current recession. We began to insure personal savings accounts and Social Security provided a retirement plan for everyone.

Now our future is looking brighter. In a few years, our property values will increase, our retirement funds will regain their losses and we’ll have a national plan for health care. Then the conservatives can return to their mantra of blaming everything on the Democrats and illegal immigrants and elect another Bush as president while the rest of us prepare to blame the Republicans for the next recession.