Every time I hear President Obama or any other Democrat blame George W. Bush for the recession, it makes my head want to explode. It is so dishonest that words can barely describe it. Yes, Bush was the President when it happened, but Bush didn't put the policies in place that made it happen. For the last 16 months, I've asked every liberal who said 'it's Bush's fault' to tell me what Bush policy or policies caused the recession, and I'm still waiting for an answer. They got next to nothing (except maybe for Greenspan and Bernanke keeping interest rates too low, which is Fed policy, not White House policy), because there is next to nothing. I don't say this because I'm a Bush fan. I'm not one. I say this because I have a fondness for the truth.
To find out what did cause the recession, consider this New York Times article from September 30th, 1999, titled Fannie Mae Eases Credit To Aid Mortgage Lending. The author's name is Steven A. Holmes, and his words in 1999 were amazingly prophetic:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
"Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements," said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."
Here we have the Clinton administration and Fannie Mae (run almost entirely by Democrats) wiping out credit requirements in mortgage lending. I'm not sure how this was Bush's fault.
Now, guess when the housing bubble started really exploding ???????
It started exploding in, you guessed it, 1999, the same year the easy credit policies were put in place. Here's a graph of the housing bubble:
That darned Bush. He created the housing bubble before he even became President. Man, that guy is insidious.
Now listen to more from the New York Times article quoted above. The author describes what could happen with the easy credit policies instituted by the government. He sounds like Nostradamus with this observation:
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
"From the perspective of many people, including me, this is another thrift industry growing up around us," said Peter Wallison a resident fellow at the American Enterprise Institute. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers
As I've been saying for almost two years, the government caused the recession with it's policies and pressuring of the banks. Yet, have you heard even one government official cop to it, especially on the Democratic side of the aisle ? I haven't heard even one Democrat say, 'you know, we instituted some really bad policies, which almost brought down the entire financial system. Our bad.' No, instead you hear them say 'it's Bush's fault.'
By the way, the American Enterprise Institute, who warned that the easing of credit could lead to failures and bailouts of the financial industry, is one of those mean conservative groups, the ones Obama continually says are responsible for "the failed policies of the past." I question who is truly responsible for those failed policies, and I know it wasn't Bush.
Some Democrats are no doubt thinking at this point, 'okay, but Bush did nothing to stop the problem. Ha !!!'
But Bush did do something to stop the problem. When the Bush administration saw Fannie Mae spinning out of control in 2003, he tried to scale it back. The following is from a September 11, 2003 New York Times article, and describes the actions Bush wanted to take.
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
"There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises," Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.
But alas, the Bush plan was blocked. Who were the opponents of the Bush plan to reform Fannie and Freddie to manage the exploding risk ???? The NY Times article tells us:
Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
"These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
That would be the same Barney Frank who now says it's all Bush's fault. Sure Barney, whatever you say. Frank is one of those guys who you can always tell is lying…..his lips move.
In 2005, Republicans again brought forward legislation to reign in Fannie and Freddie. At that time, Federal Reserve Chairman Alan Greenspan said of Fannie and Freddie, "We are placing the total financial system of the future at a substantial risk." Democrats blocked that legislation in committee.
Yet Obama blames it all on Bush, and has said so about a thousand times by now. He got elected President by saying it. The problem is, it was never true. Bush wasn't a dictator. He couldn't act alone, and the Democrats blocked reform at every turn.
As Congress decides whether or not to keep Ben Bernanke as the Chairman of the Federal Reserve, it's also helpful to know that Bernanke got almost everything wrong leading up to the recession too. He backed the easy credit policies and downplayed the extent of the risk. So, naturally, the Democrats want to keep him. In Bernanke's defense, he's made the right moves since the economic collapse, though I'm not sure there were any different moves for him to make.
And so the fictional narrative of the Democrats and the Obama administration goes on and on and on……it's all Bush's fault. The 'failed policies of the past' blather. It's nothing but a wall of noise, misdirection away from the real truth.
It would be nice if we had a media in this country to set the record straight. The recession was only the biggest economic story since 1929. I guess that's not as important as Jon and Kate plus eight, or whatever their names are, or the fact that Sarah Palin goes moose hunting. That's the real news.
Our priorities are just perfect. In the next election cycle, thanks to the Citizens United v. FEC ruling, maybe some corporation will air an ad on television exposing the truth that the media keeps so well hidden. And maybe that's what the Democrats are so afraid of. So afraid that they vote against freedom of speech to keep dissenting opinions off the air.
