Schumer’s Straddle

The Democratic presidential nominee, Senator Obama, was on the campaign trail yesterday taking aim at someone who has been retired from the Senate since November 30, 2002 — Philip Gramm of Texas. In remarks prepared for delivery yesterday in Green Bay, Wisconsin, Mr. Obama called Mr. Gramm, “the architect in the U.S. Senate of the de-regulatory steps that helped cause this mess.” It sent us scrambling for Senator Schumer’s remarks back in 1999 on the passage of the conference report of S. 900, the legislation known as Gramm-Leach-Bliley, which repealed some of the regulations known as the Glass-Steagall Act.“I first want to thank Chairman Gramm and Senator Sarbanes, Chairman Leach, Representative LaFalce, and all of my colleagues who worked so long and hard on this legislation,” Mr. Schumer began, “Mr. President, this is a historic moment. We’ve been working towards it for 18 years … the future of America’s dominance as the financial center of the world is at stake. This bill is vital for the future of our country.”He was just getting warmed up. “If we didn’t pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world. That has grave implications for all of America, where financial services are one of the areas where jobs are growing the most quickly, where our technology is way ahead of everyone else, where our capital dominates the world. And it would be a shame if because Congress has been unable to act that all those advantages were frittered away as they well could be in a global world by our failure to realize the problems that our existing antiquated laws cause us.”Mr. Schumer went on, “I need not tell the Senate how important this bill has been to the financial capital of the world, New York.” He concluded, “And so, Mr. President, in conclusion, this is a historic day. It’s a historic day for my state of New York, which I am proud to say is the financial capital of the world, and with this bill has a much greater likelihood of remaining.”He went on: “From Glass-Steagall to Gramm-Leach, from the Great Depression to the Golden Age, from isolationists to internationalists, from underdogs to champions, this bill, in my opinion, Mr. President, is an American success story for our economy, for our financial institutions, for our communities and consumers and for my state of New York. And I was proud to have played a role with so many others in ensuring its passage.”The bill passed on a 90 to 8 vote, with Senator Biden, who is now Mr. Obama’s running mate, joining Mr. Schumer in approving what became known as the Gramm-Leach-Bliley Act, the law that Mr. Obama now blames for the financial crisis. While Mr. Obama has been singling out Mr. Gramm for opprobrium, he didn’t seem to have any hesitation earlier this year in trotting out the law’s other namesake, Rep. James Leach, a Republican, as one of the “Republicans for Obama.”President Clinton, in signing the law in November of 1999, issued a statement saying, “The Gramm-Leach-Bliley Act is a major achievement that will benefit American consumers, communities, and businesses of all sizes. I thank all of those individuals who played a role in the development and passage of this historic legislation.”Mr. Clinton said back then that the law “will modernize our financial services laws, stimulating greater innovation and competition in the financial services industry. America’s consumers, our communities, and the economy will reap the benefits of this Act.” He said, “Financial services firms will be authorized to conduct a wide range of financial activities, allowing them freedom to innovate in the new economy.”Noted Mr. Clinton: “The Act repeals provisions of the Glass-Steagall Act that, since the Great Depression, have restricted affiliations between banks and securities firms. It also amends the Bank Holding Company Act to remove restrictions on affiliations between banks and insurance companies. It grants banks significant new authority to conduct most newly authorized activities through financial subsidiaries.”Now that some financial institutions are in trouble, Mr. Schumer has changed his tune. Last week, he took to the Senate floor to blame the financial crisis on “Eight years of deregulatory zeal by the Bush administration.” He also said Mr. McCain “has been a leading advocate for deregulation for a very long time.” Give Mr. Schumer credit at least for not blaming Senator Gramm.But if the problem in the markets has been deregulation — and we don’t agree that it has been — Mr. Schumer has been a leading advocate for it himself. In an op-ed piece that Mr. Schumer co-authored in the Wall Street Journal with Mayor Bloomberg in November 2006, Mr. Schumer wrote, “there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators.”Mr. Schumer also called for revising the onerous Sarbanes-Oxley Act — does President Bush’s signing of that count as “deregulatory zeal by the Bush administration”? Wrote Mr. Schumer, “With the benefit of hindsight, the Sarbanes-Oxley Act of 2002, which imposed a new regulatory framework on all public companies doing business in the U.S., also needs to be re-examined.”Already the Democrat-controlled Congress is using Mr. Bush’s request for $700 billion in authority and near-dictatorial powers for Secretary Paulson as a pretext to add more regulations, taking the opposite of what one might call the Gramm-Clinton-Early Schumer approach. Maybe all the out-of-work people on Wall Street can go work for the government as regulators. The only question is what little will be left for them to regulate by the time Mr. Schumer and the rest of the politicians are done.

Schumer’s Straddle

Schumer’s Straddle

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