Given the financial debacle of the last few days, which has been cooking for some years now under the Republicans and, unfortunately, the Clinton administration which was Republican lite in its second term), a debacle now imploding under the criminal Bush laissez faire regime, it is time for a New Deal for the 21st century.

 

Out with the Republicans who don't know how to govern, and in with Rooseveltian reform.  Democrats know how government should work, a government of, by and for the people.

 

Robert Kuttner at American Prospect (via Cursor.org) writes about the seven deadly sins of deregulation and three reforms.

 

Some highlights: "Government, under Franklin Roosevelt, got serious about regulating financial markets after the first cycle of financial bubble and economic ruin in the 1920s. Then, as now, the abuses were complex in their detail but very simple in their essence. They included the sale of complex securities packaged in deceptive and misleading ways; far too much borrowing to finance speculative investments; and gross conflicts of interest on the part of insiders who stood to profit from flim-flams. When the speculative bubble burst in 1929, sellers overwhelmed buyers, many investors were wiped out, and the system of credit contracted, choking the rest of the economy.

"In the 1930s, the Roosevelt administration acted to prevent a repetition of the ruinous 1920s. Commercial banks were separated from investment banks, so that bankers could not prosper by underwriting bogus securities and foisting them on retail customers. Leverage was limited in order to rein in speculation with borrowed money. Investment banks, stock exchanges, and companies that publicly traded stocks were required to disclose more information to investors. Pyramid schemes and conflicts of interest were limited. The system worked very nicely until the 1970s -- when financial innovators devised end-runs around the regulated system, and regulators stopped keeping up with them.

"Here are the seven deadly sin and the three reforms.  Read the entire article with its illuminating explanations...Kuttner hits the bullseye.  Sin One: Allowing Mortgage Lending to Become a Casino; Sin Two: Allowing Unregulated Bond Rating Agencies to Decide What was Safe; Sin Three: Failing to Police Sub-prime; Sin Four: Failure to Stop Excess Leverage; Sin Five: Failure to Police Conflicts of Interest; Sin Six: Failing to Regulate Hedge Funds and Private Equity; Sin Seven: Repeal of the Glass-Steagall Act.

"Three Basic Reforms: Reform One: If it Quacks Like a Bank, Regulate it Like a Bank; Reform Two: Limit Leverage; Reform Three: Police Conflicts of Interest.

"We're talking about a Roosevelt-scale counterrevolution here. But nothing less will prevent the financial collapse from cascading into Great Depression II. And the public should never again forget that this needless collapse was brought to us by free-market extremists."

Again, a Democratic president, Obama, will have to clean up the GOP elephant's mess, just like FDRhad to after Republican Herbert "Great Depression" Hoover.