Street Sweeping

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					Street Sweeping
Eamonn Fingleton
American Conservative; Oct 20, 2008; 7, 20; Docstoc
pg. 6

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Description: Far from putting on the brakes, government revved the engine. President [George W. Bush] advanced his notion of the "ownership society" as integral to national identity: "the idea of people owning a home is part of the American Dream." Legislation like the Home Mortgage Disclosure Act and the Community Reinvestment Act facilitated risky lending. The Federal Reserve contributed to the problem as well. The Fed's loose money policies under Alan Greenspan encouraged the technology bubble" of the 1990s, notes sociology professor Waiden Bello, a leading critic of globalization. "When it collapsed, Greenspan, to try to counter a long recession, cut the prime rate to a 45-year low of one percent in June 2003 and kept it there for over a year. This had the effect of encouraging another bubble-in real estate."Another notable example of [Henry Paulson]'s conflicts concerns the rescue of American International Group. As reported by Gretchen Morgenson of the New York Times, Goldman Sachs was AIG's largest trading partner. An AIG bankruptcy would have blown a hole of perhaps as much as $20 billion in Goldman's balance sheet-significant even by masters-of-the-universe standards. Although the insurer's rescue was conducted by the Federal Reserve Board, not the Treasury, Paulson's views were probably not immaterial to the outcome. Moreover, Lloyd Blankfein, Paulson's successor at Goldman, was reportedly in the room as the AIG bailout was negotiated.Paulson's tough-it-out demeanor seems in character, however, when viewed in the context of the Bush administration's appalling record on predatory lending. In the face of strong pressure from state attorneys general and other officials in 49 states in the first half of this decade, the administration chose not just to sweep shocking evidence under the carpet but actively took the predators' side against their critics. The scandal was highlighted in a Feb. 14 op-ed by Eliot Spitzer, who charged that America's financial markets would be "th
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