I see it regularly claimed that financial crisis reflected de-regulation. I was mighty puzzled. Deregulation? Has not Basel been a spectacular landslide of regulation, with massive apocalyptic government takeover of the financial system, with government deciding who shall be winners and who shall be losers, with government allocating lending to favored groups and away from disfavored groups? Eventually I discovered that this “deregulation” was the Gramm-Leach-Bliley Bill, also known as the Financial Services Modernization Act of 1999, a bill three hundred and eighty five pages long, which repealed one page of the seventeen page Glass–Steagall Act of 1933
Among the many catastrophic things things Gramm-Leach-Bliley did was to make takeovers dependent on loaning to poor and non asian minorities, which had the effect that people who believed that lending to poor and non asian minorities was safe wound up in charge, and people who believed it was unsafe wound up unemployed.
This in turn led to lots of disastrous lending by bank managers infamous for their extreme political correctness.
It is often pointed out that most of the dud lending was not covered by the CRA – but just as breathing is covered by the commerce clause, all lending is in effect covered by the CRA.
Angelo Mozilo of Countrywide on January 13, 2005 catastrophically pledged $1,000,000,000,000.00 in mortgages by 2010 to minority and lower income borrowers, very little of which has been paid back. The Clinton Administration’s threat in 1994 to extend the Community Reinvestment Act paperwork requirements to nonbanks like Countrywide led Mozilo to sign a treaty with Clinton’s HUD secretary Henry Cisneros promising to lend like Countrywide was covered by the CRA. But what really went wrong is that Countrywide sincerely believed that lending vastly more to Hispanics was a great business idea – because a banker that did not genuinely and sincerely believe that would not have been able to take over lots of other people’s banks with other people’s money the way that Mozilo was able to.
Don’t you realize that the world financial crisis was caused by *greed*? – because until the past 15 years nobody was greedy.
It was when people suddenly started being greedy – probably due to right-wing propaganda – that the world’s financial problems took-off.
Luckily, greed has now been abolished by Western governments, so we should be okay.
Fortunately there is no danger of returning to the bad old days when stingy bankers believed that if you needed credit, you did not deserve credit.