The conditions that led to the collapse of the highly-speculative sub-prime mortgage market were put into place in November of 1999, with the passage that month of the Gramm-Leach-Bliley Act, which rescinded decades-old regulatory restrictions that might have prevented the runaway speculation in "synthetic" derivatives.
The 1999 Gramm-Leach-Bliley essentially repealed the Glass–Steagall Act, which was signed into law by President Franklin D. Roosevelt in 1933. Glass-Steagall introduced banking reforms that were designed to prevent the consolidation of commercial banks, investment banks, mortgage lenders, securities traders (brokerages), and insurance companies. Glass-Steagall also imposed regulation on speculative trading, at the very least, it made such trading transparent so that nothing was done in back-rooms that was designed to rob investors.
Glass-Steagall was designed to prevent exactly the kind of collaboration that brought us the Goldman-Sachs fraud. Glass-Steagall was repealed in 1999 by a Republican-controlled Congress who pushed for the passage of the Gramm-Leach-Bliley bill. Gramm-Leach-Bliley was named after its three sponsors, all of them Republicans: Congressmen Phil Gramm (R-Texas), Jim Leach (R-Iowa) and Thomas J. Bliley, Jr. (R-Virginia). The Gramm-Leach-Bliley Act tore down the regulatory framework that would have helped protect against the sub-prime mortgage bubble and the speculation that led to a collapse of the market where speculators traded the "derivative" securities that were created from those sub-prime mortgages.
The passage of Gramm-Leach-Bliley represented the culmination of over two decades of implementing "Reaganomics," which was a belief in two things: 1) free, unregulated capitalism would result in a level playing field in which the players could be trusted to abide by the rules, acting honestly and responsibly at all times and 2) massive transfers of wealth from the working class to the ultra-rich would result in increased capital investment, the creation of large numbers of new industries and jobs, and a general "rising tide" of wealth that would lift all of our boats. The passage of Gramm-Leach-Bliley represented Reaganomics in action.
Now both political parties would like to pin the blame for the decline of the United States economy on the other, but the truth is, both parties were complicit in tearing down the regulatory framework that would have mitigated, if not prevented, the disaster. The truth is, both parties were willing to give "Reaganomics" a try, and it was a huge experiment, designed to answer the question: "Should America's government restrain itself from interfering in the free market economy, or should it maintain an involvement, acting when necessary to prevent and correct the abuses of corporations?"
Truly, Reaganomics was an experiment that failed, dramatically and disastrously. Reaganomics failed the nation. Republican rule failed the nation.
Look, I voted Republican for 28 years in America's Deep South Bible Belt ... don't think I wasn't a "good conservative" in the 1980's. I was a believer in "trickle-down" ... I firmly believed that giving more money to the rich was the best way to create jobs and wealth for everyone. In fact, I believed all the lies Americans tell themselves about themselves ("we are not imperialists"). But I've seen the results of the policies and ideologies we made into a religion, and they are ugly. One American political party has since found the courage to admit the mistake that was made in experimenting with extremist pro-business policies and to correct that mistake by re-regulating the activities of banking, finance, and insurance companies; the other party continues to live in denial of reality, and offers the nation nothing in the way of a solution but to keep doing exactly the same things that caused the problem in the first place. They ask us all to put our faith and trust in the very people who caused the financial crisis in the first place. That's insulting to me. It should be insulting you, too.
Check the record ... how did your own Senators and Congresspersons vote?
Senate Vote: http://www.govtrack.us/...
House Vote: http://www.govtrack.us/...
I'm not trying to fix blame solely on the Republicans for what happened in 1999, but it is important to realize that the Republican Party still refuses to abandon the ideology that led directly to the disaster. Finger-pointing isn't the answer; but it is necessary for everyone to realize and accept that horrendous mistakes were made; these need to be corrected; the regulatory framework that would have mitigated the effects of the sub-prime mortgage bubble burst needs to be restored, and the companies who profited from nearly breaking the country's economy need to be held to stricter standards of accountability to the American people. And that's going to happen; with or without Republican involvement. Unfortunately, it appears that the Republican Party really is "The Party of Wall Street."
http://en.wikipedia.org/... (1933)
http://en.wikipedia.org/... (1999)