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StumbleSun Editorial:
Asleep at the switch
President Bush contributed to housing crisis by reacting too little, too late
Friday, Dec. 26, 2008 | 2:03 a.m.
President George W. Bush made it a priority to encourage more Americans to buy homes. It’s what he didn’t do that helped fuel the mortgage crisis.
The New York Times on Sunday detailed a series of White House decisions, or lack thereof, that contributed as much to the crisis as lenders who approved risky loans, consumers who took mortgages they couldn’t afford and financial institutions that hitched themselves to troubled mortgage-backed securities.
Bush ignored warning signs of a deepening crisis and then either reacted too late or pursued policies that made matters worse. “There is no question we did not recognize the severity of the problems,” Al Hubbard, a former Bush economic adviser, told the Times. “Had we, we would have attacked them.”
The administration openly encouraged lenders to offer what turned out to be risky loans based on his belief that innovative lending would help first-time buyers who would not otherwise be able to afford a home. Added to that toxic environment were Bush-appointed banking regulators who looked the other way.
Mortgage bankers and brokers expressed their thanks by contributing nearly $847,000 to Bush’s successful 2004 reelection campaign, more than triple what they had four years earlier.
Although Bush correctly predicted that government-sponsored mortgage giants Fannie Mae and Freddie Mac could face turmoil, he blew a chance to forge a compromise with Congress in 2005 that would have strengthened oversight over those agencies and possibly could have avoided the necessity of the government takeover that occurred in September.
The administration also ignored some of its own experts. A former Bush economic adviser, Lawrence Lindsey, told the White House in 2006 that housing prices were headed for a crash. Another Bush economic analyst, Jason Thomas, warned top administration staffers in early 2007 that the monthly cost of owning a home far outpaced the cost to rent, an indication that housing prices were inflated and about to fall.
Bush can certainly point to people outside his administration who contributed to record home foreclosures, but he is at least equally to blame. He had several opportunities earlier in his presidency to clamp down on risky loans, but he failed to use his clout appropriately.
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All the above is true.
Bush deserves blame for not stepping up. It was his job to do so.
But the seeds of destruction were sown in the Clinton adminstration and ecouraged every step of the way by leaders in the Democratic party. They all pushed very hard for lowering lending standards to get minority into homes. The Democratic leaders were very happy with Bush's continuing the push.
That is one big social experiment blew up in our faces. Solar/Wind is going to be the next one that blows up in our faces.
The Democrats, Republicans and Bill Clinton passed into law a financial degregulation bill. That allowed the poison of sub-prime to flow into market world-wide.
Also, his key oversight and regulatory dude who oversaw the New York area banks and Wall Street failed to his job, too. Just an FYI, Obama has appointed this dude to be his chief of his economic team and sec. of treasury.
The Bush-monger continue to Blame bush for everything. Sure Bush could have done more.
"There is no question we did not recognize the severity of the problems," Al Hubbard, a former Bush economic adviser, told the Times. "Had we, we would have attacked them."
Does that make Bush bad?
This has been a long festering 30 year problem.
The LV Sun believes that "Although Bush correctly predicted that government-sponsored mortgage giants Fannie Mae and Freddie Mac could face turmoil, he blew a chance to forge a compromise with Congress in 2005"
But where is The LV Sun's investigative reporting of why Harry Reid, Chris Dodd, Nancy Pelosi, and Barney Franks as the Democratic Congressional Leadership failed to compromise? What have they done over the last 2 years?
The Community Reinvestment Act of 1977 was enacted by a Democratic Congress and signed by Democrat Jimmy Carter, but it was in 1995 that the real regulatory pressure by ACORN began to build on America's banks to meet "regulatory quotas" for loan-making to unqualified buyers in low-income communities.
The SEC forced SunTrust Banks, in 1998, to restate financials with regard to holding more the one year's worth of reserve, effectively causing them to reduce reserves to a limit of one year. The central bankers in Basel in 1988, agreed to worldwide reserves standards, and updated them in Basel in 1999, with no positive result.
From the late 90s, multiple audits showed a need to fix Fannie and Freddie. In 2000, Rep. Richard Baker proposed Fannie Mae and Freddie Mac reform and it failed. The Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, failed to pass.
The Federal Reserve head Alan Greenspan feed the housing market with cheap interest rates far too long after 9/11.
The housing crises started in late 2006 and the recession started in December 2007. Yet the Federal Reserve monetary policy was still tight worrying about inflation and not jobs and homes. (5.25% in August 2007 to 4.25 in December 2007).
The financial companies are morphing into holding banks with specific reserve requirements. Monies going in support "deleveraging" are also being held to build reserves and face the next wave(s) of credit failure on their opaque holdings, and buy other banks. Are secretive trading tools like dark pools of liquidity (or virtual trading arenas) still being used?
The June $150 billion stimulus package was only large enough to match the lost marginal propensity to spend, due to the gas price increase.
The July 2008, a housing rescue law (Foreclosure Prevention Act of 2008 - H.R.3221) is an abysmal failure used for 100 homes, because the Act is too complicated and too expensive for the everyday homeowner to take advantage.
Criminal liabilities imposed under Sarbanes-Oxley have driven accountants to stricter and stricter accounting evaluations and interpretations of the "Mark-to-Market" rule. FEC could but has not changed.
If he was asleep then what was congress when they were requested to oversight the Fannie and Freddie Groupand shouted to the accusers that they were on a witch hunt. Seems to me that these are the main culprits in this debacle and should be standing in a court of law for dereliction of duty. Representatives of the people my sorry behind. As far as leadership in Congress ????? None!!!!!!