Four Reasons to Thank FDR
March 26, 2008
As bad as things are right now, the credit crunch and the housing market meltdown would be a lot worse if it weren’t for those New Deal reforms the wingers hate so much:
In the 1930s, Franklin Delano Roosevelt saved American capitalism from its own self-inflicted wounds by erecting a new financial infrastructure—often over the vociferous opposition of the bankers and investors whose poor judgment had helped precipitate the Great Depression. During the New Deal, the government reacted to a disastrous systemic failure by creating the sort of backstops, insurance, and risk-spreading mechanisms the market had failed to develop on its own, such as deposit insurance, federal securities registration, and federally sponsored entities that would insure mortgages.
Despite sustained efforts to tear down the New Deal—from the repeal of the Glass-Steagall Act in 1999 to President George W. Bush’s ill-fated 2005 efforts to dismantle Social Security—the 1930s-vintage infrastructure has proved remarkably durable. And this crisis has elicited new experiments in policy, just as the Great Depression did. The Federal Reserve has been systematically lowering its standards for what it will accept as collateral for loans. This week, Hillary Clinton called for a national panel to recommend solutions to the housing morass. (She said the group should include former Federal Reserve Chairman Alan Greenspan, which is a little like Chicago appointing a cow to a panel on preventing disastrous fires.) But as the nation once again confronts a systemic failure in housing and housing-related credit, the Bush administration is going back to the future, using New Deal-era agencies as the cornerstone of its response.
Don’t tell that to Amity Shales! According to her wingnut take on the Depression, everything would have gotten better faster if only that silly FDR had allowed the magic marketplace fairies to do their work.