Bill Clinton is steamed about his inclusion on Time magazine’s list of 25 people who contributed to the current economic crisis. Though Clinton is in good company, with Alan Greenspan and George W. Bush, he rejects the dubious honor and makes a rather audacious claim of his own: “My question to them is: Do any of them seriously believe if I had been president, and my economic team had been in place the last eight years, that this would be happening today? I think they know the answer to that: No.”
Really? It was Clinton who “reformed” and stepped up enforcement of the Community Reinvestment Act in 1995. This loosened lending requirements for low-income borrowers who could not afford their mortgages, helping to build up the housing bubble. As Steve Sailer and others have pointed out, CRA dollar commitments climbed from $8.8 billion from 1977 to 1991 all the way to $4.2 trillion from 1992 to 2005. Clinton also adopted a CRA-like stance toward government-sponsored enterprises like Fannie Mae and Freddie Mac, presiding over a fourfold increase in their balance sheets in 1997 and 1998 alone. Finally, Clinton was a fairly reliable booster of loose monetary policies throughout the 1990s.
Clinton arguably does get a bad rap for the repeal of the Glass-Steagall Act through signing Gramm-Leach-Bliley in 1999. Without that legislation, it would have been illegal for J.P. Morgan Chase to have bought Bear Stearns or for Bank of America to buy Merrill Lynch. The probable result would have been even bigger taxpayer bailouts. Also, the Boston Consulting Group and other analysts have argued that diversification wasn’t the main thing that got banks into trouble and was in some instances helpful. All that said, it is nice to be reminded that Clinton played a bigger role in the deregulation of banking than any recent Republican president.
While Greenspan’s legacy has been taken down a peg by the financial meltdown, there has been greater reluctance to reassess Clinton’s economic management. He is remembered, especially by voters, as an architect of economic growth, low unemployment, and huge budget surpluses while the name Bush is often associated with recessions, lost jobs, and big deficits. But Clinton has taken a lot of credit for bubbles that have only burst under his successors’ watch and deserves his share of criticism too.