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REREGULATION….Sebastian Mallaby argues today that, contrary to Barack Obama’s claims, deregulation isn’t to blame for the credit crisis:

The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. In different ways, these players were all peddling financial snake oil, but as Columbia University’s Charles Calomiris observes, there will always be snake-oil salesmen. Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn’t been willing to buy snake oil, nobody would have been peddling it.

Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash. By contrast, lightly regulated hedge funds resisted buying toxic waste for the most part — though they are now vulnerable to the broader credit crunch because they operate with borrowed money.

At a minimum, I’d make a couple of counterpoints. First, Phil Gramm’s 2000 Commodity Futures Modernization Act (supported, unfortunately, by the Clinton administration) was specifically designed to “protect financial institutions from overregulation” — primarily by leaving the market for credit default swaps completely unregulated. There may be several underlying causes for the credit crisis, but this is surely one of the very big ones.

Second, after the LTCM debacle of 1998, Alan Greenspan (and, sigh, Robert Rubin) produced a report suggesting that we should “encourage,” “promote,” and “consider” guidelines that might prod financial institutions into reducing their drunken sailor approach to leverage. But they declined to produce actual regulations to that effect. In fact, as I noted the other day, in 2004 the SEC issued a rule allowing big investment banks to increase their allowable leverage ratios. That turned out not to be such a good idea.

Third, there was a bipartisan failure to regulate the mortgage market into a semblance of rationality. Just the opposite, in fact, as lawmakers pressed Fannie Mae to insure ever dodgier loans and Alan Greenspan encouraged Americans to take advantage of ever cheaper mortgage rates. A little bit of commonsense rulemaking could have gone a long way in the mortgage market a few years ago.

Mallaby is right that deregulation isn’t solely at fault for the credit crisis. But it’s hardly an innocent bystander either. A little bit of market skepticism over the past decade would have done everyone a world of good (literally), and once we catch our breath from the current meltdown it’s time to think about how to rebalance our attitude toward financial regulation. It’s an area where Democrats have been barely any better than Republicans, and one that Barack Obama is right to give serious attention to.

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Minority rule, corruption, disinformation, attacks on those who dare tell the truth: There is a direct line from what's happening in Russia and Ukraine to what's happening here at home. And that's what MoJo's Monika Bauerlein writes about in "Their Fight Is Our Fight" to unpack the information war we find ourselves in and share a few examples to show why the power of independent, reader-supported journalism is such a threat to authoritarians.

Corrupt leaders the world over can (and will) try to shut down the truth, but when the truth has millions of people on its side, you can't keep it down for good. And there's no more powerful or urgent argument for your support of Mother Jones' journalism right now than that. We need to raise about $450,000 to hit our online fundraising budget in these next few months, so please read more from Monika and pitch in if you can.

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