Barack Obama on Thursday laid much of the blame for America’s unfolding credit crisis on the financial deregulation of the 1990s in his hardest hitting attack so far on the economic legacy of Bill Clinton’s administration.
By Edward Luce in Washington DC
Mr Obama’s speech – the fourth so far this week by a presidential candidate focusing on America’s probable recession – called for an overhaul of US financial regulation and another $30bn in fiscal stimulus.
Without mentioning the Clintons by name, the clear target of Mr Obama’s speech was the economic record of the 1990s. Hillary Clinton has portrayed her candidacy as offering a return to the economic successes of the 1990s. She has also presented herself as more competent on the economy than Mr Obama.
In his address Mr Obama associated Mr Clinton’s abolition of the Depression-era Glass-Steagall Act in 1999 with the financial scandals that rocked the early years of the Bush administration and which led up to the bailout earlier this month of Bear Stearns.
Mr Obama also ascribed the bankruptcy of Enron and WorldCom in 2001 and the subsequent lack of oversight of the US sub-prime mortgage market to the influence of special interests and lobby groups in Washington DC dating from the Clinton era. And he contrasted his refusal to take campaign donations from lobby groups with Mrs Clinton’s acceptance of such funds.
“This was not the invisible hand at work – it was the hand of industry lobbyists,” he said. “Instead of establishing a 21st century framework we simply dismantled the old one – aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy.”
The Clinton campaign contrasted Mr Obama’s speech, which laid out six principles for modernizing what his campaign called America’s “balkanized” regulatory system, with what it described as their own candidate’s more detailed and practical proposals to help victims of home foreclosure.
Neera Tanden, Mrs Clinton’s policy director, described Mr Obama’s proposals as “vague” and lacking in “concrete solutions”. “On Monday Senator Clinton announced a detailed, specific plan to address the housing and credit crisis,” she said. “On Tuesday, Senator McCain announced that he had no plan. And today, Senator Obama offered just words.”
Mr Obama on Thursday also attacked Mr McCain, whose response to the sub-prime crisis “amounted to little more than watching this crisis happen”. But economists said the significance of Mr Obama’s speech was in offering the most clear distinction so far with Mrs Clinton on the economy.
Thursday’s exchange marks at least a temporary return of the Democratic campaign to a debate over policy in a race that has recently been dominated by candidates’ attacks on each other’s integrity. Both Mrs Clinton and Mr Obama have also united to portray Mr McCain as offering a continuation of Mr Bush’s economic record. Both portray Mr McCain as offering a “third Bush term”.
Mr Obama on Thursday also echoed calls by his Senate colleagues for an investigation into rumours that traders who had taken a short position on Bear Stearns’ equity had spread panic about the investment bank. And he reversed the conventional aphorism about Wall Street and Main Street. “What was bad for Main Street was bad for Wall Street,” he said. “Pain trickled up.”