UPDATE: More recent posts concerning this question on the US financial crisis here.
An American Jotman reader writes in an email:
I'm forty-something mom. I've been reading your blog with great interest. I am honestly trying to figure out how you think. You seem to be sincere in your beliefs and not just full of hateful rhetoric like some of the other bloggers. There are way too many democrats for you all to be wrong so I'm trying to be open minded and understand at least some of your views. Please don't think I'm being sarcastic or trying to trick you or anything; I'm truly trying to understand.First, just to clarify, I am not a member of any political party or association, whether in the US or elsewhere. If you go back, you will find some instances on this blog where I have commended McCain relative to Obama (i.e. McCain's history of opposing to biofuel/ethanol subsidies).
So, here's what I want to hear from you about. It is my understanding that the democrats in congress pressured the lenders to give loans to clients with questionable credit during the Clinton administration. While the motivation was pure, putting low income families into homes of their own, the practice was flawed. Mr. Greenspan even said that trouble was ahead if these lending practices continued and yet more and more loans were made. Then, these loans were packaged and re-packaged, sold and re-sold. Since these mortgages were worthless, the companies that now own them are in deep financial trouble. My understanding is that the very people that are working on the bail-out are the people that profited most from the fannie mae/freddie mac business. So now I want to know how you see it from your side of the fence.
But on the major issues of our times, I cannot possibly support the Republicans. I believe McCain and the Republican Party have had ample opportunity to put the United States on a solid financial and economic footing. I believe that the results speak for themselves.
If -- as Republicans make a point to emphasize -- the roots of the present crisis go back to the Clinton Administration, then why have the Republicans not fixed the problem in the meantime? This is 2008. Bill Clinton is not running for the presidency in 2008, and Obama was not a US senator in the 1990s. On the other hand, John McCain was a member of the US senate during the Clinton Administration -- and up until last week -- McCain was a very strong advocate of market deregulation. Recall that Bill Clinton choose to work closely with the Republican-led Congresses of the 1990s, and a number of Congressional Democrats followed the lead of the Republican majorities in Congress.
As forty-something mom points out, the Wall Street banks got the economy into dire straights because of deregulation. Deregulation -- which has been a policy objective of the Bush Administration and the Republican Party -- has allowed the banks to re-package and sell home mortgages -- along with other fancy financial packages. Banks have lobbied Congress and the White House to further deregulate Wall Street. The White House appears -- in some instances -- to have responded by not enforcing the laws already on the books (see this post). The Wall Street lobby persuaded President Bush and other Republicans to campaign that Social Security retirement savings ought be invested in the stock market. They also pushed a bill through congress that made it difficult for individual Americans now burdened by high medical bills and higher mortgage payments to claim bankruptcy protection in the courts.
Although the Democratic Party is not blameless, the Republicans who have been running the country for quite a long time now have closely followed an agenda set by Wall Street. Moreover, these "friends of Wall Street" are the very people advising John McCain today. Even though McCain once fashioned himself as a "maverick," he continues to depend for advice advice from the very individuals who pushed for the deregulation of Wall Street.
Enough about the politics. What about the plan? Sanjuro, a Jotman reader with plenty of international business experience, has examined the proposed solution to the financial crisis. Check out "Why the Wall Street bailout is wrong"