Apparently they both advocated for the repeal of the Glass-Steagall Act back in the 80s. But pretty much everyone did, which is required for regulation to ever get repealed.
Glass-Steagall was designed to keep banks’ commercial and investment banking separate.
The narrative of the left is that financial regulations like Glass-Steagall are written to keep investors safe from predatory banks. The truth is that vast majority of regulation in any industry is lobbied for by the major players of that industry in order to stifle or prevent competition. Look it up.
Lefties think that the right regulation could have prevented any bad event in any industry.
In this case the narrative is that if Glass-Steagall hadn’t been repealed the housing crisis wouldn’t have happened. No, really. “The 1999 repeal of the Act under President Clinton.. led to reckless lending by banks and an unprecedented housing bubble.” (source)
The dumb. It hurts.
Could Glass-Steagall have limited the severity of the downturn? The New York Times previously said probably, but not by much.
What actually caused the housing bubble and subsequent bank failures by and large had nothing to do with combining banks’ commercial and investment arms.
The government did two things in the 90s that contributed to the great bubble burst in 2008. First, it repealed Glass-Steagall, which allowed banks to combine their commercial and investment activities.
Then, it created Fannie Mae and Freddie Mac. Fannie and Freddie existed to bail out banks when their home mortgage borrowers defaulted. Now if a banker can, through the power of government, enjoy all the profits from making home loans to anyone and everyone regardless of whether they’ll pay it back, then why wouldn’t he or she lend to literally anyone?
Now which do you think did more to encourage the risky loans that ultimately brought down the big banks?
Image by Bonnetmaker.