Who Caused the Economic Crisis?

McCain asked Gramm to help write his economic plan.

John McCain's friend Rick Davis lobbied for Fannie and Freddie for years, "defending" them against stricter regulation. And now? He runs McCain's presidential campaign.

And John McCain himself? He's stood by "deregulation" time and time again.

McCain: I think the deregulation was probably helpful to the growth of our economy.

Narrator: And now that the markets are in meltdown? John McCain's friend George Bush wants hardworking Americans to write the biggest blank check in history, bailing out the Wall Street firms and the Washington lobbyists who got us into this mess. Main Street giving Wall Street $700 billion and getting nothing in return? It's outrageous.

Americans shouldn't have to foot the bill for mistakes that John McCain and his friends made.

Narrator: MoveOn.org Political Action is responsible for the content of this advertisement.

Blame the Republicans!
The MoveOn.org Political Action ad blames a banking deregulation bill sponsored by former Sen. Phil Gramm, a friend and one-time adviser to McCain's campaign. It claims the bill "stripped safeguards that would have protected us."

That claim is bunk. When we contacted MoveOn.org spokesman Trevor Fitzgibbons to ask just what "safeguards" the ad was talking about, he came up with not one single example. The only support offered for the ad's claim is one line in one newspaper article that reported the bill "is now being blamed" for the crisis, without saying who is doing the blaming or on what grounds.
 
The bill in question is the Gramm-Leach-Bliley Act, which was passed in 1999 and repealed portions of the Glass-Steagall Act, a piece of legislation from the era of the Great Depression that imposed a number of regulations on financial institutions. It's true that Gramm authored the act, but what became law was a widely accepted bipartisan compromise. The measure passed the House 362 - 57, with 155 Democrats voting for the bill. The Senate passed the bill by a vote of 90 - 8. Among the Democrats voting for the bill: Obama's running mate, Joe Biden. The bill was signed into law by President Clinton, a Democrat. If this bill really had "stripped the safeguards that would have protected us," then both parties share the blame, not just "John McCain's friend."

The truth is, however, the Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been.