Opinion

What really got us into ‘this mess’

“They want us to go back to the same old policies that got us into this mess in the first place.”

Was the speaker President Obama? Bill Clinton? Rahm Emanuel? Debbie Wasserman Schultz?

All of the above — and many more of the luminaries who graced the stage at last week’s Democratic National Convention in Charlotte, NC. This has become a standard, stump-speech line, yet no one bothers to spell out exactly what those policies are.

I assume “mess” refers to the 2008 financial crisis, which rocked the US and global economy to its foundation, threatened to bring down the banks and left a landscape of foreclosed homes in its wake. What was at the root of the mess? Answer: bad loans. The same thing that historically has gotten banks into trouble. (No, it wasn’t proprietary trading.)

This time around, it was subprime and substandard mortgages that were bundled, packaged into securities, sliced, diced and sometimes squared, and sold to investors as AAA-rated securities.

So what policies were responsible? I doubt the Bush tax cuts of 2001 and 2003, which lowered marginal tax rates and those on capital gains and dividends, had anything to do with the housing bubble. On the other hand, the government’s unwritten, and underwritten, policy on housing did.

The government enacted laws to encourage lending to minorities and low-income households. It established affordable-housing goals for Fannie Mae and Freddie Mac. And it closed its eyes to financial chicanery at the two government-sponsored, public-private enterprises, which are now wards of the state.

And while we’re on the subject of Clinton, I almost fell off my chair when I saw his recent ad. “The Republican plan is to cut more taxes on upper income people and go back to deregulation,” Clinton says. “That’s what got us in trouble in the first place.”

Deregulation? As in the repeal of Glass-Steagall in 1999? Didn’t some Obama campaign official vet this ad?