Listening to politicians on the left speak about the current financial turmoil, one gets the impression that when President Bush took office in 2001 there was a perfect financial regulatory system in place. Only since then, they claim, has it been systemically destroyed by the Bush administration. Speaker Nancy Pelosi (D-CA) says, “the Bush Administration’s eight long years of failed deregulation policies have resulted in our nation’s largest bailout ever, leaving the American taxpayers on the hook potentially for billions of dollars.” Barack Obama echoed this sentiment in the final presidential debate when he said, “the biggest problem in this whole process was the deregulation of the financial system.” There’s just one problem with this analysis. There has been no deregulation of the financial sector during the Bush administration.

In fact, the largest legislative action in financial services during the Bush years was the Sarbanes-Oxley Act, which increased regulation and drove capital markets overseas. Furthermore, according to data from the Government Accountability Office, of the 23 major regulatory actions (defined as an economic effect of $100 million or more) taken by the Securities and Exchange Commission since Bush took office, only eight lessened regulatory burdens. Compare that to President Bill Clinton’s second term, which lessened burdens in almost half of rulemaking proceedings. But maybe the problem wasn’t bad regulations, but bad regulators. Maybe the Bush administration weakened financial regulators? This isn’t true either. The SEC’s budget jumped from $357 million in 2000 to a whopping $629 million in 2008.

Another favorite target of the left has been the Gramm-Leach-Bliley Act, which ended the Depression-era prohibition on banks engaging in the securities business. Clinton was the one who signed this law, so we will let him defend it:

I don’t see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn’t signed that bill.

All of this is not to say our current regulatory framework is perfect. Far from it. There are far too many different regulatory agencies trying to regulate the same activities. We need regulatory cuts and consolidation. Unfortunately, Congress cannot be trusted to come up with solutions. Senate Banking Chairman Chris Dodd (D-CT) is the biggest recipient of campaign cash from Fannie Mae and Freddie Mac. House Banking Chairman Barney Frank (D-MA) said this about Fannie and Freddie in 2003: “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis.” These two men epitomize why only 12% of Americans approve of the job Congress is doing. The American people deserve an independent commission to explain what caused the financial meltdown and recommend reforms to keep it from happening again. Heritage president Ed Feulner writes:

A recent Rasmussen poll found that 59 percent of Americans agree with Ronald Reagan’s statement that “Government is not the solution to our problem; government is the problem.” A fair and complete investigation seems likely to confirm that wisdom by revealing that many of today’s problems were triggered by our elected officials — not by a failure of the free market. It’s time for some real oversight of our congressional overseers.

Quick Hits:

  • A group of atheists in London raised $113,000 they plan to spend on 30 buses carrying this message: “There’s probably no God. Now stop worrying and enjoy your life.”
  • According to Rasmussen Reports, 58% of U.S. voters say more tax cuts will better stimulate the economy than new government spending.
  • Sarah Palin is talking to the national press corps more often than Joe Biden, reports CBS News.
  • Under Barack Obama’s tax plan, 49% of Americans who are eligible to vote will pay no income taxes, the Tax Policy Center has concluded.
  • Western donors have promised to spend about $4.5 billion to rebuild Georgia, whose economy and infrastructure were badly damaged by this summer’s war with Russia.