During a press briefing yesterday, White House press secretary Dana Perino was asked to explain the “accusation that the White House is to blame in some way, or the Bush administration policy is to blame in some way” for the current financial crisis.
Perino responded by issuing a challenge: “I would ask you to go back and look…what specific regulation did they want that we blocked? What specific regulation did we eliminate?”
The Wonk Room gladly took up the Perino challenge. Here are some of the specific regulations of the financial system that the Bush administration has eliminated:
– The Uptick Rule: In July 2007, the Securities and Exchange Commission (SEC) eliminated the “uptick rule,” which “made it hard for speculators to push the price of a stock down after betting it would fall.” As the Wonk Room noted yesterday, “since then, legions of short sellers have progressively hammered Wall Street, contributing greatly to the current stock market crisis.”
– The Net Capital Rule: In 2004, the SEC loosened the “net capital” rule, which required “that broker dealers limit their debt-to-net capital ratio to 12-to-1.” The five investment banks that qualified for an alternative rule — Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley — were allowed “to increase their debt-to-net capital ratios, sometimes, as in the case of Merrill Lynch, to as high as 40-to-1.”
– State Laws Against Predatory Lending: In 2003, the Office of the Comptroller of the Currency (OCC) issued regulations that exempted national banks from state laws against predatory lending. As Slate reported, “with the state laws nullified, national banks were free to engage in the sharp practices the states were hoping to stamp out.”
The Bush administration eliminated these “specific regulations,” contributing to the specific mess that the financial system is in today.