IN OUR OPINION: Keating Economics Takes its Toll
October 6, 2008
In these final critical weeks of the current presidential campaign, Senator John McCain is trying to “turn the page” from the turmoil that’s crippling national and world economies as well as individual taxpayers’ personal finances.
To this end, he’s encouraged his running mate to attack Barack Obama’s character by insisting Senator Obama has ties to terrorists. This tactic to reignite fears among undecided voters that Senator Obama cannot be trusted because of his unusual name and dark skin promotes prejudicial treatment of all Americans who fail to fit into a cookie-cutter mold of who can be “trusted.”
Senator McCain has also launched anti-Obama NRA ads which say Obama must be defeated because he would take away the right of Americans to own and use guns. This is simply untrue. Obama has stated he believes the second amendment does extend to individuals and endorsed the Supreme Court’s decision this summer which struck down a city’s gun ban as too restrictive.
In the meantime: the stock market is at or lower than it was in 1999; European markets are plummeting; the Wachovia deal hit a snag of major proportions; and Colorado-based grocer Safeway is claiming it may not be able to stock its shelves fully and must close 14 stores if it cannot get credit. CNBC is now reporting there are major concerns about insurance companies such as John Hancock Prudential and others. Aside from people who have life insurance policies and annuities worrying about losing their savings, one analyst mentioned that premiums would have to go up on all our insurance policies not because more houses burn down or more claims are submitted, but because of the bad investments these companies have made.
The cause of all these problems goes beyond the housing crisis to what caused the housing crisis in the first place: federal regulations that were too weak to perform a basic function: make certain the premiums we all pay are used to pay claims.
This weekend I read a book about the lead-up to the Great Depression and I have concluded we cannot wait another minute to stop the greed. This New York Times article regarding making money on selling municipalities short is front and center. (For a summary of this article’s main points, go here.) This issue is not esoteric or complicated. Cities will not be able to pay their employees if this trend goes the way of the financial meltdown. There was a critical period after the stock market crash and before the Great Depression spread throughout the world when Hoover and Wall Street thought they could handle the situation without regulation. They were wrong then, and I believe Senator McCain and his followers are wrong now when they say we must remove regulations.
The basic problem behind the $700,000,000,000 and all the other billions the Fed has pumped in and is pumping into the bailout lies in the fact that these vast sums add nothing to the gross national product. No new jobs are created. In fact we are losing jobs in record numbers nationwide and world-wide. All the bailout does is take paper losses off the books of financial institutions without any gains to the real economy.
Polls show the American public is still overwhelmingly opposed to government intervention in their lives. I believe this election can and must educate the American people as to what regulation is. I do not believe the vast majority of Americans believe that insuring bank deposits and savings accounts from greedy investors is unwanted regulation. I believe they would agree with Senator Obama that such regulations amount to necessary safeguards, not inconvenient interventions.
This morning I watched the documentary “Keating Economics: John McCain and the Making of a Financial Crisis” posted by the Obama campaign on KeatingEconomics.com. According to David Plouffe, Senator Obama’s Campaign Manager:
“During the savings and loan crisis of the late ’80s and early ’90s, McCain’s political favors and aggressive support for deregulation put him at the center of the fall of Lincoln Savings and Loan, one of the largest in the country. More than 23,000 investors lost their savings. Overall, the savings and loan crisis required the federal government to bail out the savings of hundreds of thousands of families and ultimately cost American taxpayers $124 billion.
“In that crisis, John McCain and his political patron, Charles Keating, played central roles that ultimately landed Keating in jail for fraud and McCain in front of the Senate Ethics Committee. The McCain campaign has tried to avoid talking about the scandal, but with so many parallels to the current crisis, McCain’s Keating history is relevant and voters deserve to know the facts—and see for themselves the pattern of poor judgment by John McCain.
I believe it is clear from this 13-minute documentary that John McCain failed to learn an important lesson regarding the potential problems behind deregulation then and continues to make the same mistakes by insisting on the need for deregulation now. Perhaps KeatingEconomics.com will successfully circumvent the mainstream media outlets that seem to want to discuss what John McCain wants to discuss: anything but the economy and his complicity in its downturn as a constant supporter of the misguided policies of limited federal oversight and lack of regulation of the nation’s financial industry.
—Sherry Seiber
P.S. According to a Rasmussen Report regarding a recent poll, a significant majority of Americans would throw out all of Congress and start over. Our mission here at Imagine A Great Election will not end on election day 2008. Rather, this election will represent a starting point as we look toward 2010. We need candidates for Congress who will work diligently toward the type of change Americans want and need.
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