Posted 11/4/2008 - to view original click here - www.conradventi.com
The roller coaster ride on Wall Street has drawn an amazing amount of attention in recent months. Regardless of a win from John McCain or Barack Obama today, the issue of the regulation of Wall Street will be loudly spoken about in the coming weeks. Each candidate has a completely different regulation plan than the exiting president.
The Economists' Voice offers a great summary of each party's history and what we can expect to hear from each candidate:
While the presidential candidates have been diverted by critical issues ranging from Barack Obama’s taste in lettuce to John McCain’s condo, it’s hard to deny that, once elected, serious questions involving economic regulation—everything from housing finance to alternative energy mandates—will be front and center. And here, at least, the divisions are clear: Obama would use a heavy hand to push the economy back on track, while McCain would do his best to put the free back in free markets. Or maybe not.
Ever since the New Deal, Democrats have largely accepted the label as the party of regulation—defenders of the weak from the vagaries of soulless capitalism. Republicans, for their part, position themselves as the nemeses of the social engineers and do-gooders who would sap the economy of vigor.
But once in office, reality bites. Thus, with more than a little encouragement from Detroit, Ike committed the GOP to the biggest public works project in history—the Interstate Highway System. Richard Nixon imposed price controls to contain inflation, while Ronald Reagan protected the swooning steel industry from foreign competitors and the first President Bush championed market intervention in the name of cleaner air and accommodations for the disabled. The second Bush hasn’t stood on principle either, lavishing seniors with heavily subsidized prescription drugs and supporting bailouts for both investment bankers and the giant private mortgage insurers. Democrats, of course, have been no better at sticking to their script. Carter deregulated airlines and trucking, while Clinton deregulated telecommunications and nuclear enrichment as well as opening the door to cheap Mexican imports.
Thus, while Obama and McCain may both lull true believers with the bromides of an earlier generation, a subtler mix of ideology and interest group muscle is bound to drive the regulatory agenda once elected. Consider just a few of the big choices ahead.
Housing Finance
The idea that Wall Street prefers Republicans to Democrats (and vice versa) is badly dated—just ask Chuck Schumer, a member of the Senate’s finance and banking committee who has collected $1.4 million in campaign contributions from the securities industry in the last five years. But more than money drives the parties toward similar policies on financial regulation. The financial industry has become so critical to keeping the economic machinery moving and the fallout from a financial crisis has become so difficult to predict, that no president would let principle stand in the way of preventing the failure of a major financial institution.
Yet, as the bumpy road to the latest housing legislation shows, ideological divisions still have consequence. Conservative senate Republicans, who viewed the $300 billion in loan guarantees given to Freddie Mac and Fannie Mae (the nominally private housing insurers) as another step toward the socialization of the mortgage market, staged a brief, embarrassing rebellion before bowing to White House pressure. If the housing market does not rebound next year, one can expect a far more interventionist fix from Obama than McCain. And more generally, where Republicans are inclined to view information disclosure as the key to financial market health, ongoing disruption of Wall Street could trigger Democratic regulation of everything from short selling to hedge fund behavior to asset securitization.
To view the complete article click here: regulation-after-bush Source: "Regulation after Bush" Robert Hahn and Peter Passell The Economists' Voice: Vol. 5 : Iss. 4, Article 5. (2008) http://www.bepress.com/ev/vol5/iss4/art5 http://www.bepress.com/cgi/viewcontent.cgi?context=ev&article=1389&date=&mt=MTIyNTgzNTUzNA==&access_ok_form=Continue
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