By PAUL KRUGMAN
Published: May 31, 2009
“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.
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The increase in public debt was, however, dwarfed by the rise in private debt, made possible by financial deregulation. The change in America’s financial rules was Reagan’s biggest legacy. And it’s the gift that keeps on taking.
The immediate effect of Garn-St. Germain, as I said, was to turn the thrifts from a problem into a catastrophe. The S.& L. crisis has been written out of the Reagan hagiography, but the fact is that deregulation in effect gave the industry — whose deposits were federally insured — a license to gamble with taxpayers’ money, at best, or simply to loot it, at worst. By the time the government closed the books on the affair, taxpayers had lost $130 billion, back when that was a lot of money.
But there was also a longer-term effect. Reagan-era legislative changes essentially ended New Deal restrictions on mortgage lending — restrictions that, in particular, limited the ability of families to buy homes without putting a significant amount of money down.
These restrictions were put in place in the 1930s by political leaders who had just experienced a terrible financial crisis, and were trying to prevent another. But by 1980 the memory of the Depression had faded. Government, declared Reagan, is the problem, not the solution; the magic of the marketplace must be set free. And so the precautionary rules were scrapped.
moreMore on the
Garn–St. Germain Depository Institutions ActUpdated to add, Reagan is among the
worst Presidents on the environment:
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Before delving further into Reagan's track record, it's worth recalling his infamous public statement that "trees cause more pollution than automobiles do," and that if "you've seen one tree you've seen them all." This is not, in other words, a president who demonstrated much ecological prowess.
Reagan's ignorance in this area is personified by James Watt and Anne Gorsuch, the leaders he selected to head the Department of Interior and the U.S. EPA, respectively. "Never has America seen two more intensely controversial and blatantly anti-environmental political appointees than Watt and Gorsuch," said Greg Wetstone, director of advocacy at the Natural Resources Defense Council, who served on the Hill during the Reagan era as chief environment council at the House Energy and Commerce Committee.
The list of rollbacks attempted by these administrators is as sweeping as those of the current administration. Gorsuch tried to gut the Clean Air Act with proposals to weaken pollution standards "on everything from automobiles to furniture manufacturers -- efforts which took Congress two years to defeat," according to Clapp. Moves to weaken the Clean Water Act were equally aggressive, crescendoing in 1987 when Reagan vetoed a strong reauthorization of the act only to have his veto overwhelmingly overridden by Congress. Assaults on Superfund were so hideous that Rita Lavelle, director of the program, was thrown in jail for lying to Congress under oath about corruption in her agency division.
The gutting of funds for environmental protection was another part of Reagan's legacy. "EPA budget cuts during Reagan's first term were worse than they are today," said Frank O'Donnell, director of Clean Air Trust, who reported on environmental policy for The Washington Monthly during the Reagan era. "The administration tried to cut EPA funding by more than 25 percent in its first budget proposal," he said. And massive cuts to Carter-era renewable-energy programs "set solar back a decade," said Clapp.
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In 1995, Watt was indicted on 25 counts of felony perjury and obstruction of justice by a federal grand jury.<24> The indictments were due to false statements made to a grand jury investigating influence peddling at the Department of Housing and Urban Development, which he had lobbied in the mid to late 1980s. On January 2, 1996, as part of a plea bargain, Watt pleaded guilty to one misdemeanor count of withholding documents from a federal grand jury. On March 12, 1996 he was sentenced to five years' probation and ordered to pay a $5,000 fine and perform 500 hours of community service.<25>
During a March 1991 dinner event organized by the Green River Cattlemen's Association in Wyoming, Watt said, "If the troubles from environmentalists cannot be solved in the jury box or at the ballot box, perhaps the cartridge box should be used."<26><27>
In a 2001 interview, Watt applauded the Bush administration energy strategy and said its prioritization of oil drilling and coal mining above conservation is just what he recommended in the early 1980s.<28> "Everything Cheney's saying, everything the president's saying - they're saying exactly what we were saying 20 years ago, precisely ... Twenty years later, it sounds like they've just dusted off the old work."<28>
linkThe worst.
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