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During her presidential announcement speech over the weekend, Hillary Clinton offered this interesting explanation for the Financial Crisis:
We’re still working our way back from a crisis that happened because time-tested values were replaced by false promises. Instead of an economy built by every American, for every American, we were told that if we let those at the top pay lower taxes and bend the rules, their success would trickle down to everyone else.
What happened? Well, instead of a balanced budget with surpluses that could have eventually paid off our national debt, the Republicans twice cut taxes for the wealthiest, borrowed money from other countries to pay for two wars, and family incomes dropped. You know where we ended up.
Tax cuts? Inequality? Budget deficits? I have heard this story before. It is highly unpersuasive, as I argued in a 2012 blog post with one of my favorite ever headlines, “Obama didn’t end the Great Recession that Bush didn’t cause.” Don’t believe me? Trying reading any of the opinions in the Financial Crisis Inquiry Commission report. They seem to blame banks and regulators and government agencies and credit raters and so forth. Interestingly, here is one of Time magazine’s “25 people to blame for the financial crisis”:
Bill Clinton. President Clinton’s tenure was characterized by economic prosperity and financial deregulation, which in many ways set the stage for the excesses of recent years. Among his biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment.