Bush to blame for economy?

On May 20th, the Inky ran a letters column and a commenter asked: “Three and a half years into Obama's presidency and you still continue to blame Bush?” to which I responded:

• Uh, coniljw, Bush oversaw the housing bubble that was noticed by liberal Keynesian economists in 2002 and popped at the end of 2007. Yes, Obama has spent his entire term trying to dig his way out of the mess that Bush created. The downturn of 2007 that continues to this day hasn't been called the “Great Recession” for nothing. Granted, the fact that Republicans have been fighting tooth and nail to keep Americans poor and hungry and unemployed along with Obama's “pivot” from ending the recession to reducing the deficit from early 2010 to mid-2011 are also part of the problem, but yes, Bush is the primary cause of our economic troubles today.

• rich2506

Posted 4:25 PM, 05/20/2012

It was Jimmy Carter that signed the CRA in to law, not Bush. [Community Reinvestment Act – how it allegedly led to the housing bubble]

It was Clinton who gave it teeth - http://clinton6.nara.gov/1993/12/1993-12-08-briefing-by-bentsen-and-rubin.text.html

It was Barack H Obama who sued citibank under the CRA in 1998 to force then to lead money to 'minorities' - Buycks-Roberson v. Citibank Fed. Sav. Bank

The Bush administration warned about Fannie and Freddie. They got push back from Barney Frank, Chuck Schumer and Chris Dodd and the rest of the democrats. You can youtube it

• Philly.Tru

To which I responded:

• All that Alan Greenspan or Ben Bernanke had to do to pop the housing bubble was to call attention to it. Had they called attention to the fact that housing prices were out of line with rental prices, the free market would have done the rest to deflate the bubble. They failed to do so. Also, prices for commercial construction were consistent with residential housing, it was way overpriced. Bush could very easily have caused the housing bubble to deflate. Was he oblivious or did he deliberately allow it? It's the old question, stupid or evil? Eh, hard to say.

• rich2506

Posted 7:43 PM, 05/20/2012

I don't see such a simplistic solution as being effective. Greenspan tried it in 1996 with stock market and his "irrational exuberance" phrase. In the long run, no one listened but he sure did get the tar beat out himself for saying it.

• Philly.Tru

Posted 8:29 PM, 05/20/2012

Rich, even AFTER the collapse, C. Dodd was STILL pushing for "More Minority Home Ownership". (This was in the spring of '09 he voiced his ongoing support for the policy.)

It was that idealistic push, sell by skin color, not financial ability, that CAUSED the collapse, yet he still was pushing for more of the same.

Ya, same old question... Was Dodd Stupid? or Evil?

Good intentions are fine, but when they cause more harm than good, you would THINK it would be a wake up call to stop, unless you WANTED them to be harmed.

• turkytom

And oh yeah turkeytom, speaking of "idealistic pushes," remember G.W. Bush and the "Ownership Society" where Bush pressed for more homeownership? http://www.youtube.com/watch?v=kNqQx7sjoS8 Ya didn't? Yep, more of that ol' "memory hole" that folks have for inconvenient fact. And Phillytru, if the Federal Reserve Chairman can't speak plainly, why does he exist? What's the point of having a spokesperson who can't speak?

• rich2506

Essentially, my take on the housing bubble is that Bush was “on watch,” i.e., the “guy on the bridge” and in command when the housing bubble occurred. Is it reasonable to look at the immediate past at what one's predecessor might have done? To a point, yes. Right-wing figures have tried to blame President Obama for job losses that occurred during Obama's “first few months, before any of his own policies had time to take effect." Is it reasonable to use the same idea to let Bush off the hook for 9-11? Not really, as military and political policies are easier to change quickly than are economic ones. And one might notice that Media Matters wasn't arguing for nine months, the time Bush had to change the policies that made 9-11 possible, but for just a few months to allow Obama time to put new policies into effect. Yes, it's reasonable to give a president some time to establish new policies, but if Bush had a problem with the CRA, he had more than enouh time to do something about it.

As the housing bubble was noticed in 2002, that gave the Bush Administration five years to notice that there was a problem with housing prices not being consistent with rental prices, that is, that there was a bubble. Bush's Administration then had to the end of 2007 to do something about it. Above, a commenter states the right-wing claim that

The Bush administration warned about Fannie and Freddie. They got push back from Barney Frank, Chuck Schumer and Chris Dodd and the rest of the democrats.

My major problem with this claim of Democratic pushback being a decisive factor is that I just can't reconcile this claim with Bush's fight with Democrats over warrantless surveillance. In early 2008, a year after Democrats took control of both the House and the Senate, Democrats seemed enegized to bring Bush's policies to heel:

Sen. Chris Dodd (D-CT) successfully led an effort to block immunity in December, just before Congress' holiday recess, and the Senate returned to the issue last week, considering dual proposals from the Intelligence and Judiciary committees. Last Thursday, Republicans and a dozen Democrats blocked Judiciary's proposal to update FISA without immunity, but the GOP then refused an agreement that would have required a mere 51-vote majority to pass further amendments.

Were Democratic efforts successful? No, because Bush has the veto pen, a Republican Party that voted in lockstep to support his policies and traitorous Blue Dog Democrats who broke with their party to vote with him. Remember, when the FISA/warrantless surveillance battle occurred, Bush's approval rating was down to 28%, a rating that competed with that of Nixon and Truman at their lowest, but his disapproval rating was 71%, the worst that an American president has ever received. Considering that Bush successfully prevailed anyway on an issue that was important to him, I just can't see how Democratic pushback on the housing issue could possibly have swayed him or the Republican Party.

Also, as I pointed out in my final message, Bush stood behind what he called the “Ownership Society,” where people would own their own homes. From a 2004 White House press release:

Expanding Homeownership. The President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade. Under his leadership, the overall U.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2 percent. Minority homeownership set a new record of 51 percent in the second quarter, up 0.2 percentage point from the first quarter and up 2.1 percentage points from a year ago. President Bush's initiative to dismantle the barriers to homeownership includes:

• American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;
• Affordable Housing. The President has proposed the Single-Family Affordable Housing Tax Credit, which would increase the supply of affordable homes;
• Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program; and
• Simplifying Homebuying and Increasing Education. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners.
  

Right-wingers, of course, tend to “disappear” this embarrassing bit of history and try to make it sound as though Democrats were pushing for more homeownership against Republican resistance.

Could Alan Greenspan have worded his “Irrational Exuberance” statement better and more skillfully? There's no question that his statement had an immediate impact. But “in typically enigmatic fashion, Greenspan didn't actually say what most people think he did. His famous utterance was actually part of a question, not a statement of fact or opinion.” So no, I don't believe that Federal Reserve Chairmen are doomed to never state their true opinions, just that they should do so in a carefully-planned manner.