Editorial February 28, 2014



Making the Same Mistake Twice ,Three Times

“It took 8 years for deregulated S&L’s to fail, 9 for Glass Steagall repeal to deliver us to where we ended up in 2008; the Great Recession.”

Rep John Dingell

Rep John Dingell. Retiring after 59 years.

In 1999 Congress debated a bill called the Financial Services Modernization Act (FSMA) that became law in 2000. The law repealed the Glass Steagall Act created in 1933 to help the country deal with the Great Depression and establish the FDIC to insure some bank deposits. It was a finance bill that also regulated financial institutions prohibiting what were considered risky investments so to protect deposits.

The repeal of Glass Steagall, at its heart, allowed banks and insurance companies to sell each others’ products and invest depositor’s money in the stock market on the assumption that markets would expand and compete making more choice and better prices for consumers. But the repeal also paved the way for what we have learned the hard way; risky investments.

The FSMA had wide bipartisan support but one Democrat Congressman, John Dingell, Jr. opposed the bill and coined, in 1999, an all too familiar phrase we heard many times in 2008, “What we are creating now is a group of institutions which are too big to fail. Not only are they going to be big banks, but they’re going to be too big everythings; they’re going to be into securities and insurance; in the issuance of stocks and bonds and underwriting and they’re also going to be in banks.”

Dingell explained how the law would impact taxpayers, “Taxpayers are going to be called upon to cure the failures we’re creating tonight. And it’s going to cost a lot of money and its coming, just be prepared for those events.” And the solution he predicted, “And you are going to find they are too big to fail, so the fed is going to be in and other federal agencies are going to be in to bail them out. Just expect that.”

You wonder why no one listened to Dingell. He was clear in his floor speech on the outcome of the law in 1980 passed to deregulate savings and loan institutions. Within 8 years the then-made-legal risk-taking by S&L’s bore the predictable fruit; over 1,000 failed and, as Dingell pointed out, cost US taxpayers $500 billion. The S&L bailout took well over a decade and those handling it fed well at the public trough; we heard reports of photo copy machine operators pulling $150 per hour and lawyers feathering their financial nest readily. Taxpayer’s loss, small connected group’s gain.

It took 8 years for deregulated S&L’s to fail, 9 for Glass Steagall repeal to deliver us to where we ended up in 2008; the Great Recession.

In 2008 the Dodd-Frank Wall Street reform bill aimed again at regulating financial institutions to avoid another Great Recession the repeal of Glass Steagall created, but Republicans had a problem with a provision in the bill creating the Consumer Financial Protection Board (CFPB), a Board with enough teeth to issue regulations when it thinks investors and the taxpayers are at risk. This week in the House we saw the consideration of HR 3193 that makes CFPB regulations harder to pass and apply. Dodd-Frank, in our opinion, is rather weak on financial market regulations but at least it put the CFPB in place to protect investors from loss and taxpayers from future bailouts. But, despite Dingell’s retirement this year, highlighting his wisdom in these matters, there are members of Congress who still believe an unregulated market will always bring prosperity, or they simply don’t care about the outcome.

In Dingell’s mind the 1999 bill and its provisions was “…a race to the bottom.” And he was right. Unfortunately for taxpayers Congress is losing Dingell after 59 years on the Hill and the halls are being filled with new Members who, considering the House vote on HR 3193 still aren’t listening to him.

There’s an Alternative to the Imperial Presidency


By Lee H. Hamilton


Without a strong Congress able to find its way effectively through the thickets of lawmaking, this President and his successors will surely continue to address the nation’s challenges on their own….in the end there is no substitute for legislation”



In his State of the Union speech to Congress last month, President Obama drew widespread attention for pledging to use his executive authority to advance his priorities. He insisted he intends to act with or without Congress, and listed well over a dozen actions he plans to take by executive order. “Wherever and whenever I can take steps without legislation to expand opportunity for more American families,” he said, “that’s what I’m going to do.”

Plenty of people were happy about this. The speech was applauded by pundits who have given up on Congress and believe the only way to move forward is by strengthening the presidency. Our political system, they say, is weighed down by too many interest groups, too many checks and balances, and too few avenues for circumventing a Congress that is both polarized and highly susceptible to the wishes of its donors. The present government is paralyzed, they believe. A stronger presidency would get Washington moving again.

As you’d expect, others are alarmed by this approach. The President, they say, is trampling on the constitutional separation of powers, grabbing powers for himself that were meant to be shared with Congress. They point out that the Constitution gives Congress a primary role in making policy.

The problem with this debate is that it’s missing a key part of the equation. Yes, our system needs a strong presidency. But it also needs a strong Congress. We are best off as a nation when the two consult, interact, and work together as powerful branches.

In truth, every president in recent memory has expanded the power of his office and been accused of a power grab. They’ve had plenty of motivation to do so. The modern world demands quick, decisive action. Americans tend to support presidents who act forcefully. Congress is complex, convoluted, and hard to work with; it is far easier for an administration to act on its own. Even members of Congress often defer to the President, counting on him to address issues they don’t want to tackle or can’t agree upon.

And presidents have wielded executive orders to great effect. Abraham Lincoln’s Emancipation Proclamation, FDR’s Works Progress Administration, John Kennedy’s Peace Corps, affirmative action under Kennedy, Lyndon Johnson and Richard Nixon, Ronald Reagan’s enshrining of cost-benefit analysis as the key to regulatory review — all came about through executive orders.

Yet there are limits to this approach, because in the end there is no substitute for legislation. Presidents cannot write a budget, raise the minimum wage, or reform entitlements by themselves. Because executive orders lack the permanence and force of law, they can be hard to implement and can be summarily cancelled by a later president. They are more subject to legal challenge than legislation. And most important, executive orders are a unilateral exercise of power and do not benefit from a process of consensus-building and consultation with voices independent of the President’s.

Consensus-building can’t happen in a vacuum, however. Without a strong Congress able to find its way effectively through the thickets of lawmaking, this President and his successors will surely continue to address the nation’s challenges on their own. The question is, how far down that road can we go before Congress becomes irrelevant, with too much power — and too much potential for the abuse of power — in presidential hands? Like our founding fathers, we should be skeptical of the concentration of power.

Politico recently detailed a spate of executive orders planned by this administration, which would affect everything from how power plants operate to how we commute to how the environment will be regulated. Taken together, they will “push deeply into everyday life” for Americans, the article noted.

Whether a president oversteps his authority with these and other executive orders is inevitably colored by whether you agree with the proposed order. But my point is different. It is that the march toward presidential unilateralism, whether the president is a Democrat or a Republican, dangerously undercuts our constitutional system. Before we give up on the separation of powers, let’s try strengthening Congress. This may not be the easy route, but if we don’t take it, representative democracy itself is in doubt.

Lee Hamilton is Director of the Center on Congress at Indiana University. He was a member of the U.S. House of Representatives for 34 years.