Look around much of the United States today. Besides a huge recession that resists the two year recovery pattern one used to expect in these downturns over the last sixty years, we see an America middle class in full retreat, with a denuded public sector. The powers once in place to protect the values of people's homes, their jobs and their investments have all been stripped away by deregulation through corporate lobbying . And the biggest de-regulator pin-up guy of them all was Ronald Wilson Reagan.
In 1989, the savings and loan industry crashed. The tax payers were put on the hook for $150 billion. The bil to deregulate the savings and loan industry was pushed through Congress by the GOP and some conservative southern Democrats. .Reagan signed the bill, saying "this bill will make a lot of people wealthy". The era of private profits and pubic losses--since all S&Ls were protected with $100,000 dollars of federal bail-out money for each account in each S&L--had begun. Meanwhile, poverty in America went up under Reagan, not down as he promised and the promise he made wasn't kept until a Democrat, Bill Clinton, presided over a let-up in the late 1990's.
Both Clinton and George W. Bush continued to move ahead with Reagan's deregulation mania, the latter being the most enthusiastic. The Republicans who ran Congress from 1995 to 2007 followed suit. The result in part was the Enron mess, where an energy company not only jacked up rates on power and deliberately created shortages (rolling blackouts and brownouts) to consumers in California and other states, but also hid the fact that they were going broke from their own employees and stockholders for months while CEO Ken Lay and Jeffrey Skilling cashed out their stock and lived like kings. (Until Lay died and Skilling went to jail that is.)
But deregulation fever was not done, kids. In 2008, the economy really crashed. Major investment banks--Citigroup, Lehman Brothers, Goldman Sachs, AIG, et al---went belly up. The housing market, which had traded toxic mortgages and Wall Street, which created clever and opaque securities schemes issued by these banks were the culprits. The financial gimmickry together with deregulation and plain old cozy realtionships on the Washington-Wall Street axis did the rest.
Even those who had purchased rock-hard, non-adjustable mortgages found themselves living in homes that were now "underwater"--worth less on the market than they could be sold for the mortgage holder to even break even. Whole areas like Las Vegas and central California were slammed. Foreclosures sky-rocketed.
It is estimated by John McCain, the Arizona Senator and former Republican Presidential candidate, that half the homes in his state were technically "underwater". This in a nation where middle-class people had most of their wealth concentrated in the family home. Or in the 401k program at work, another place where even modest investors found themselves losing decades worth of savings just as many faced layoffs, underemployment or the failure of their small business due to lack of demand in industries like retail sales, manufacturing and construction .
Whole cities in the Middle West , including Reagan's boyhood home of Dixon, Illinois, faced enormous job losses as business, spurred on by tax breaks and low tariffs, headed for overseas climes to get their goods manufactured.
Some of this would have happened without Ronald Reagan you might be thinking, and I agree. But not all of it. Not by a long shot. It was Reagan who first went after the protections afforded by the Glass-Stegall Act of 1933 that separated the commercial banks from the potentially reckless ones. The process was slowly chipped away so that when Bill Clinton foolishly ended the Glass-Stegall protections altogether in a bill signing in 1999, there was little left to save.
But the taxpayer, somehow, was still on the hook. And so were all the people who suffered in the housing crash. The bailouts and the trillions lost that will likely never be fully recovered started in earnest under Reagan.
But why would the son of a shoe salesman and a housewife from rural Illinois, a man who entered the workforce from Eureka College in 1933 when the unemployment rate in the nation was over 24 percent, and a vocal champion of the New Deal of Franklin Roosevelt, have helped decimate the middle class, especially in cities and towns like Dixon, Illinois, his first home? What happened to this son of a midwestern working class family, and, more importantly, how is it that his vision changed America in a way so antithetically to the popular myth of Reagan as a cheerful and benign leader who was supposed to have "restored America" in his eight years of office?
The answer might be from Reagan's own fortunes long before he entered politics. He was a leading man in Hollywood, but somehow his bosses at Warner Bros Pictures saw him mainly as a light romantic lead. When television came in, and Reagan's film roles got worse (see "Bedtime for Bonzo') he began to cultivate powerful friends in the southern California business world. This led to him helping a powerful company, MCA (Music Corp. of America) get a blanket waiver from the Screen Actors Guild to both represent talent in Hollywood but produce programming and movies. Reagan was also a client of MCA and its soon-to-be powerful chairman Lew Wasserman.
He got a regular job as spokesperson for the General Electric Company in 1954 as the host of "GE Presents". It was produced by MCA, in case you hadn't guessed. Part of his duties as host was to go about the country on the company's behalf making speeches at GE plants and at business meetings. The "speech" Reagan delivered for GE became the blueprint for his anti-government trademark "The Speech", that he used effectively to get him into the governorship of California in 1966. Friends at MCA and other companies even bought property he owned near Santa Monica and Northridge (both suburbs of Los Angeles) at wildly inflated prices so he would be set for life financially for his troubles as a candidate.
Was Reagan "bought" or did he just see the light, as he liked to say later?
It really doesn't matter at this point. His manichean world view was either too pro or too anti-government throughout his life. (Was he ever a pragmatist? Yes. But only when his hand was forced by the legislatures in Sacramento and later in Congress.)
What matters is the damage that was wrought. Reagan doesn't deserve as much blame as the author gives to him I believe but he is the man who most embodied the spirit of free-market absolutism.
This book also goes into great detail to explain how Reagan appointed people to positions of power in regulatory agencies who had little interest in regulating the corporations they were supposed ot be watching. This was a trick George W. Bush learned all too well.
And so Ronald Reagan rode off into the sunset in 1989 and now he is supposed ot be a revered figure in American politics. Sad to say, really, for the truth is his rhetoric gave ammunition to a second generation of nihilistic Reagan robots who make him as President on some matters (like protecting Social Security and shoring up deficits by closing tax loopholes) now look like the old New Deal liberal he had been decades earlier.
If you like a little strong irony along the way with your true-life stories , this book is a good place to go to learn how we got into this mess.