How Exactly Did Bush Cause This recession?

We are going to have to agree to disagree. While you think Fannie and Freddie were the sole drivers of the financial crisis, I believe that they played a role. The big financial institutions who fought regulations and the credit agencies who failed to do their job correctly are also at fault.

The free market mantra of Greenspan that these big financial institutions would regulate themselves all while operating in a black box, completely removed from transparency proved to be devastating.

There is plenty of blame to go around. However, if you just want to solely blame Dems and Fannie and Freddie, then so be it. We will have to agree to disagree.

 

There is plenty to be done, and plenty to be discovered. Personally, I have yet to read the financial inquiry commission report. I have yet to get a full perspective on the Federal Reserve's actions. I have yet to fully understand all the steps that led to the subprime mortgage crisis. It will take a handful of highly informed individuals to correct the mistakes that led to the disaster.

 

Yes,and the proof is simple.Why did the problem makers all resign or
are leaving.Franklin Raines,Chris Dodd and now Barney Frank.
Barney Frank basically used upo all the crapola he could spiel.
When Newt asked in a debate why Barney Frank wasn't behind bars,
that was an Omen.

 

Yet this proof you speak of is simply a handful of the causes of the recession. As me and other forum members have stated, you have to look at the crisis with open eyes, and consider all causes as legitimate. Every argument being made on this thread is valid.

 

There would have been no "derivative problem" if the banks were not eager to get rid of the bad mortgage paper that was a direct result of unconstitutional Democrat housing policies. Everyone knew the game was fixed and all bet on the drugged horse to win, or when the drugged horse would drop dead of a heart attack instead of spreading the bets on all the other horses. There is no derivative problem for the automobile market. Disabling the free market caused the bubble and the crash, not THE FREE MARKET.

 

I'm glad to hear I'm not alone in the dark on the Fed, I've yet to get a handle on its dealings in all this.

As far as correcting the mistakes, I hope we don't have to remain hostage to that same circle of people that produced the mess. I'm getting tired of hearing the same names over and over and over again.

 

None of those guys made any loans, bought houses they couldn't afford, bought mortgages with leveraged money, insured mortgage backed securities with leveraged money (aka credit default swaps), or made decisions for Wall Street firms.

You can blame them for not regulating the system enough, but if you aren't going to place blame on anyone who actually made the actions than you are just a partisan drone looking to pass your partisan ideology rather than actually figure out what took place to cause the crisis.

 

Couple things to understand about the Fed and their actions in the crisis.

#1 Read this report. It will explain to you why they jacked up reserves and purchased tons of toxic mortgages off the banking system. As you can see, the Fed didn't give anyone in the private sector money.

http://www.newyorkfed.org/research/staff_reports/sr380.pdf


The other common misconception is that the Fed lent $7 trillion or some ridiculous number. Remember that is an accumulation of all their overnight loans they made. As in they lent $10 billion to a bank, the bank paid them back, then they lent the bank $10 billion again. They are counting this as $20 billion in loans even though it's just a revolving $10 billion overnight loan.

 

Bush caused the near depression, by first traumatizing Floridians by overriding Florida Supreme court, using US Supreme court, to stop the vote count in Florida. So much for states rights, but typical hypocracy from rightwing, so not exactly surprising.

Then just after taking office, having World Trade Center destroyed by special operatives, using CIA Alqaeda,to start war with Saddam Hussein and increase Military Industrial Complex profits, inflate oil prices, and destroy Middleclass by increasing their burden to pay for war, while giving tax break to millionaires. And lets not forget: "your doin a good job Brownie" while watching New Orleans flood. And "shock and Awe", and "weapons of mass destruction", and "Mission Accomplished", and Osama? I dont know where he is, its not that important", and Valerie Plame outed by Cheney,as CIA operative, after Husband Wilson finds out "yellow cake" in Nigeria is a hoax. And Colin Powe resigns knowing he was complicite in that whole "Anodized" tubes for uranium centrifuge Bull story. But hey, "its a slam dunk" George Tenet says, a story which we can fool the American people into believing.

Not since NIXON, and his lying ass coverup for Cuban operatives, who also were part of JFK assassination, have I seen such blatant LYING and TOTAL disrespect for the American people.

Think I am just making this #$%^ up? Look it up for yourselves. I will NOT forget CONSERVATIVES throughout US history, who were opposed to Revolutionary War, who were FOR slavery, who were FOR segregation, who were OPPOSED to Equal Rights, were OPPOSED to women voting, and have at every step of the way been opposed to ANYTHING which benefits the greater good, and the MAJORITY of people, and the GENERAL WELFARE of the nation.

 

Absolutely right, deregulation started by Reagan and increased by both Clinton and Bush led to massive fraud by the mortgage lenders. To be sure Joe Blow the homeowner took bad advice from the lenders and greedily used is home for a debit card. No lender was forced to make these loans, however, but their greed got the best of them. Within no time the loans were off their books and onto someone else's, a new law addresses that. Later, in a monumental case of ponzi scheming lenders wrote loans way out of their ability to cover them using insurance companies like AIG to back them and worthless securities were created from the bundled loans to fein liquidity along with credit default swaps. We have already spent enough money to buy every house back for the Joe Blows, but we gave it to the lenders to prevent default and it still isn't near enough. Now we have to back the liquidity of every major bank in the world to prevent any kind of default audit that would expose the real amount the lenders and bankers gambled away. Now, with all these newly defaulted homes not paying property taxes and the newly unemployed not paying income taxes the states lost so much revenue that the stimulus money .9 trillion (the only part of the debt Obama caused) was used to prevent the states from defaulting instead of creating jobs. Add to this is 2 unethical wars that were not only unfunded but not even included into the budget until Obama honestly included it along with an unfunded prescription plan also not included in Bush's budgets (this is why Bush's debt appears smaller than Obama's)

 

It's what happens when you have "too big to fail" bankers with a government-insured monopoly on the printing machines.

They're bigger and badder than ever as a result of their mistakes. Blame the bankers or the government, they're all the same.

 

Bush can share the blame for financial crisis
By Mark Landler and Sheryl Gay Stolberg
Sign In to E-Mail

Print


Reprints

WASHINGTON — For his entire presidency, George W. Bush has tried to avoid the fate of his father: brought low by a feeble economy. Now, as the financial crisis radiates far beyond Wall Street, Bush faces an even grimmer prospect: being blamed, at least in part, for an economic breakdown.

"There will be ample opportunity to debate the origins of this problem," Bush said Friday in a televised address from the White House Rose Garden. "Now is the time to solve it."

But in Washington and on Wall Street, the debate has already begun. And while economists and other experts say there are plenty of culprits: Democrats and Republicans in Congress, the Federal Reserve, an overzealous home-lending industry, banks, and also Bush's predecessor, Bill Clinton - they do agree that the Bush administration bears part of the blame.

These experts, from both political parties, say Bush's early personnel choices and overarching antipathy toward regulation created a climate that, if it did not trigger the turmoil, almost certainly aggravated it. The president's first two Treasury secretaries, for instance, lacked the kind of Wall Street expertise that might have helped them raise red flags about the use of complex financial instruments at the heart of the crisis.

To his credit, Bush accurately foresaw the danger posed by Freddie Mac and Fannie Mae, and began calling as early as 2002 for greater regulation of the mortgage giants. But experts say the administration could have done even more to curb excesses in the housing market, and much more to police Wall Street, which transmitted those problems around the world.

In retrospect, "it would have helped for the Bush administration to empower the folks at Treasury and the Federal Reserve and the comptroller of the currency and the FDIC to look at these issues more closely," said Vince Reinhardt, a former Federal Reserve economist now at the American Enterprise Institute, a conservative-leaning research organization here. Reinhardt said it would also have helped "for Congress to have held hearings."

Instead, voices inside the administration who favored tougher policing of Wall Street found themselves with few supporters. William Donaldson, a former Wall Street executive with respected Republican credentials who became chairman of the Securities and Exchange Commission under Bush, quit in 2005 after facing resistance from the White House and Republican members of the panel, who criticized his support for stiffer regulations on mutual funds and hedge funds.

Today, even those sympathetic to Bush say he cannot disentangle himself from a home-lending industry run amok or a banking industry that mortgaged its future on toxic loans.

"The crisis definitely happened on their watch," said Kenneth Rogoff, a professor of economics at Harvard University who advises the Republican presidential candidate John McCain. "This is eight years into the Bush administration. There was a lot of time to deal with it."

To some extent, Bush was simply following a deregulatory pattern set by Clinton. Perhaps the most significant recent deregulation of the banking industry - the landmark act that allowed commercial banks to expand into other financial activities, like investment banking and insurance - was signed into law by Clinton in 1999.

Bush also inherited a culture of borrowing and a frothy housing market that has become "deeply embedded in the American psyche," Rogoff said. And Reinhardt said the markets seemed to be doing so well that few analysts, either in government or the private sector, had a critical eye.

"When everybody is doing better," Rogoff said, "it is difficult to see the underlying weaknesses."

Still, the White House, in the view of critics, fostered a free-market hothouse in which these excesses were able to flower. It avoided regulation of banks and mortgage brokers, leaving much of that work to the Federal Reserve, which, under Alan Greenspan, showed little appetite for regulation. By the time Bush's current Treasury secretary, Henry Paulson Jr., proposed an overhaul of regulations governing the financial sector in April, the storm was already brewing.

The administration did push hard on Capitol Hill to rein in Fannie Mae and Freddie Mac, only to find itself stymied by Congress. But the administration's intense focus on fending off what it foresaw as a looming housing crisis did not extend to the proliferation of fiendishly complex mortgage-backed securities, said Harvey Rosen, an economist who served on Bush's Council of Economic Advisers, briefly as its chairman.

"Maybe there should have been," Rosen said, "but we were focused more on the fact that if these entities just held plain-vanilla mortgage-backed securities, it was still a disaster in the making."

Beyond its deregulatory bent, some economists argue that the administration's fiscal and tax policies made the United States more dependent on foreign capital, which fueled the bubble in housing prices.

"A different Treasury would have taken a different approach," said Lawrence Summers, who served as Treasury secretary in the Clinton administration. "I don't think the economy has been well-managed, and that has certainly been crucial for the problems we're facing."

The White House and Congress wanted to make housing affordable to more Americans, and freeing up the lending markets was a way to do that. As Rogoff said, "It was a market-based way to help poor people. There was an incredible belief in free markets."

For all that faith, Bush's first two Treasury secretaries, Paul O'Neill and John Snow, came from top jobs in industry, not Wall Street. They were viewed in Washington as advocating the interests of business, and being less comfortable with the mysteries of the markets.

Neither was seen as having much influence with the White House, and the Treasury lost some of the primacy in economic policy it had enjoyed under Summers and his predecessor, Robert Rubin. O'Neill and Snow declined to be interviewed for this article.

"The primary agency responsible for keeping an eye on these things is, and should be, the Treasury Department, and I think the president erred in the first place by appointing two secretaries who had no background in finance," said Bruce Bartlett, a Republican economist who was an adviser to President Ronald Reagan and an official in the Treasury Department under President George H.W. Bush.

"If we had had a Treasury that was fully supported by the White House," Bartlett said, "and a Treasury secretary such as Hank Paulson who was really attuned to what was going on in the financial markets, maybe some of these things could have been perceived in advance."

The White House did name people well-versed in the markets to other posts, not least the chairmanship of the Securities and Exchange Commission. But Bush's first SEC chairman - Harvey Pitt, a prominent securities lawyer - was brought down by political missteps. Pitt was replaced by Donaldson, who quit in 2005.

Critics, including McCain, say the SEC has been less active under its current chairman, Christopher Cox, a former Republican congressman from California. It has spent less on enforcement and levied less in fines on wrongdoers, according to the Government Accountability Office.

"You can't overestimate what happens when you encourage regulators to believe that the goal of regulation is not to regulate," said Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University.

In other areas, the Bush administration's failures seem more a case of inaction. The administration, economists said, did little to curb the practices of mortgage brokers, who are regulated by the states. But Democrats in Congress were equally to blame for this, these economists said.

"The Democrats pushed affordable housing goals, even in the face of evidence that people who got the loans shouldn't have gotten them," said Robert Litan, a senior fellow at the Brookings Institution, a research organization in Washington. "The no-money-down loans of 2005 and 2006 were a key part of the problem."

"I blame the Democrats for demanding that Fannie Mae keep buying these loans," said Litan, who was a budget official in the Clinton administration. "I blame the administration for going along with it."

White House officials note that the administration did propose reforms of real estate settlement procedures and the Federal Housing Authority, two areas it had identified as posing the greatest systemic risk to markets. Democrats in Congress, they said, blocked these efforts.

When Bush named Paulson to replace Snow in 2006, the Treasury Department finally got an expert in markets. But early on, his focus was on improving the competitiveness of the U.S. financial sector, which he feared was losing ground to Europe and Asia.

http://www.nytimes.com/2008/09/20/business/worldbusiness/20iht-prexy.4.16321064.html?pagewanted=all

 

It does all boil down to the Community Reinvestment Act, Swamp Music. Yet any educated citizen would know that it was not until the 1980's and 1990's that politicians began to unleash the law's bad side so to speak.

Reagan and Congress started the trend with the passage of Alernative Mortgage Transactions Parity Act, which allowed non-federally chartered house creditors to write adjustable-rate mortgages.

Next came the changes to the Community Reinvestment Act in 1989, 1991, 1992, 1994, and 1995. These all made it easier for subprime mortgages to foment.

The culmination of these laws was the Gramm-Leach-Bliley Act, which was proposed by 3 Republicans, but passed by a Democratic President. This eliminated any remaining barriers preventing commercial banking activity, insurance activity, and investment bank activity from being carried out under one entity. Consequently, a bank could have their cake and eat it too.

In addition, you had the lax standards on the GSE's Fannie Mae and Freddie Mac. You also had a plethora of other policies that contributed to the crisis. Once again, blaming one party in this case is not right. Ironically, if you want to consider the origins of the CRA as the cause of everything else, look no further than Gale Cincotta. Her organization, the National Traning and Information Center, was bipartisan.

 

Without Fannie & Freddie--The World's Largest Mortgage Underwriter........

......there wouldnt have been a mortgage collapse and thus no Recession.......

George Bush tried and failed to regulate F&F......to Democrat joy....for that he deserves some blame........but a GSE like F&F was a ticking time bomb since its inception.
.
.
.

 

Got a single valid source that proves this point?

 

[ame="http://www.youtube.com/watch?v=sXTQkbiy2H0"]http://www.youtube.com/watch?v=sXTQkbiy2H0[/ame]

[ame="http://www.youtube.com/watch?v=iW5qKYfqALE"]http://www.youtube.com/watch?v=iW5qKYfqALE[/ame]

.
.
.
.

 

I agree with the article that And while economists and other experts say there are plenty of culprits: Democrats and Republicans in Congress, the Federal Reserve, an overzealous home-lending industry, banks, and also Bush's predecessor, Bill Clinton - they do agree that the Bush administration bears part of the blame.

Nonetheless, your strawman is annoying as hell. I never claimed that Bush was free from culpability. Seriously, are you this dense? Try reading what I wrote next time. In fact, if you were literate, then you would realize that I agree with many sentiments in that article, such as Bush's antipathy towards regulating the private sector, his credit to foresee the problems of Fannie and Freddie and effort to regulate them despite Democrat and Republican opposition, and belief that a hands off approach would be the best way to push his ownership society.

Now, lets learn to read and get back to your original claim: What deregulation under the Bush administration are you talking about?

 

Unnecessary wars, unbalanced tax cuts, bad economic cabinet that enabled banks.

 

None of those explain what caused the crisis. Just people saying the housing market was alright. Can you show me a source with data that proves that F&F was solely responsible for bringing down Wall Street firms and the housing industry?

 

I would consider the bad cabinet to be the primary part in which the Bush administration's actions led to the crisis.

 

yup, Republican government. And their banker cronies. Two Depressions, Teapot Dome, S+L scandal, Voodoo taxes, do nothing congress- over and over, boom and bust and scandal. Never happened. LOL

 

The repealing of Glass-Stiegel only added liquidity to the marketplace since it brought in previously "banned" players with much money to land. So what? Added liquidity does not create a price bubble unless that liquidity is used. Most people have not used all the credit on their credit cards to buy flat screens, cars, or even homes. If they did all the prices would be much higher for those items. The lowering of loan standards created the bubble. Again, unconstitutionally Democrat created Freddie and Fannie sought to greatly expand their holdings of low to moderate priced mortgages creating a demand for the banks to make such loans; to sell to their largest customers. New money in the market made all prices rise.

Those that don't believe in the free market or supply-and-demand like to downplay the effect the largest player in the game had on the bubble. Freddie and Fannie were designed to warp the housing market and operate trying to achieve political goals instead of according to sound business principals.

The banks WERE regulating themselves before Clinton changed the enforcement of the CRA. Banks were not making risky loans. To argue that OTHER banks (previously prohibited from the game by Glass-Stiegel) would have acted differently is naive and just wrong.

Unconstitutional Democrat housing policy changed the rules of the game and created the demand for the actions which caused the bubble.

 

Not the most influential government intervention. The "Greenspan Put" influenced the banks to not give a (*)(*)(*)(*).

Their risks were guaranteed...on our backs.

 

Greenspan and the FED can only create liquidity, can't make the unqualified suddenly qualify to get loans. Changing the CRA enforcement and directing unconstitutionally Democrat created Freddie and Fannie to greatly expand their low to moderate mortgage holdings in the 2000 Affordable Housing goals directive (issued by Clinton just before leaving office, and in effect for a full 4 years, or the entire first term of Bush when most of the housing bubble inflated) can and did lower loan requirements.

 

The Greenspan Put has to do with interest rates and securities. Greenspan lowered interest rates. In turn, he propped up illiquid securities, liquidating them by allowing money to flow through the markets. The policy was implemented after the 1998 LTCM Crisis, and while it provided short-run stability, it encouraged dangerous long-run financial innovation. Hey, thanks NetworkCitizen. You provided me with a specific role in which the Fed contributed to the financial crisis. Furthermore, this has a direct connection to a telling story by Alan Blinder:

http://www.kc.frb.org/publicat/sympos/2008/blinder.03.12.09.pdf

Alan Blinder is describing what is known as moral hazard.