"Heckuva legacy there, George."

[elfs]

After a comment about how terrible the economy is shaping down to be, I made the comment, "Heckuva legacy there, George." Darrel challenged me on that, asking me why I thought it was his fault and not, say, the Democratically controlled Congress of the past two years.

I'm going to ignore that Darrel pulled in the idea that Freddie & Fannie were somehow to blame for the bulk of the crisis.

Federal Reserve Board data show that:

• More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
• Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
• Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

Instead, I'm going to repeat what the doomsayer economists have been pointing out since 2001: Ben Bernanke and Henry Paulson deliberately crafted policy to allow the housing market to become overheated (obstensibly to "cushion the blow" of the tech bubble bursting in 1999-2000), deliberately allowed Fannie, Freddie, and some investment banks (those believed to be "too big to fail") to overleverage themselves way out of proportion to their actual holdings, and repeatedly looked the other way while the credit default swap market ballooned into the nightmare we have now.

Ben Bernanke and Henry Paulson serve at the pleasure of the President. George W. Bush nominated them, and he supposedly vetted them. So did the (at the time) Republican majority in Congress, during their confirmations.

When a colonel or captain exceeds his authority and commits atrocities, it is not unusual, nor is it unreasonable to expect, that his commanding officer will resign in shame for failing to properly vet and supervise a subordinate. There is this thing called "character," and good leaders are expected to have it, and to recognize it in others.

There was also existing regulatory responsibility from both the Fed and the Treasury (and the Securities and Exchange Commission) to monitor and reign in this situation. Rather than regulate, Bernanke and Paulson appear to have engineered a bubble that allowed their friends in the market system extract wealth from the market and leave behind only rubble. And it is rubble-- if it weren't, private investors would be buying them up. Instead, you and I will be forced, by the only entity that can use deadly force upon us with impunity, to cough up the dough to rescue the system.

George W. Bush will live with this legacy. He hired these people, he left them in place, and he didn't understand what he was doing when he did. They just sounded good. He's not a man of good character-- sometimes I wonder if there's enough there for him to have character at all-- and he apparently cannot recognize good character in others. He may not understand that good character is more than sheer, obstinate loyalty.

Comments

[dv-girl.livejournal.com]

If you mean Exline or whatever his name is, Darrell is a doorknob. I find Hirtes more rational. Remind him that he blamed Clinton for everything while there was a Republican congress. Ask him to explain his illogical disconnect and watch him pop a gasket. Better yet, remind him that the Republicans controlled EVERYTHING for 6 of the past 8 years and controlled the house and senate for 6 years prior to that. I assure you, he'll still find some way to blame the liberals. He's got the razor sharp mind of a 3-year-old throwing a tantrum.

[dr-memory.livejournal.com]

Besides, if you're going to look for chunks of blame to lay at the feet of the Democratic Party, arguing the minutiae of the last 24 months worth of policy vs Fannie and Freddie is kind of silly: the real meat there is back in the Clinton administration, when the Bubba in Chief rolled over and let the Gingrich congress dismantle Glass-Steagal because someone at Citicorp had decided that it would be cool to own Travellers.

[slutdiary.livejournal.com]

Everything you mentioned is accurate and fills in the details. The broad stroke, however, is the simplicity that if a President can claim credit for when things go good, he needs to take responsibility for when they go bad.

"Georgie - if it was going well you would brag about what you did. Samesame with the other way."

[insomnia.livejournal.com]

Indeed... when someone wants to blame the Democrats for Fannie and Freddie, you can point out the fact that Franklin Raines, the generally corrupt and greedy Democratically supported Fannie Mae shill that the Republicans like to blame for Fannie Mae failures, was replaced by Daniel Mudd, a Republican (http://voices.washingtonpost.com/washbizblog/2008/05/value_added_fannie_maes_dan_mu.html) and a major supporter/contributor to both Bush and McCain's campaigns. The people who put him in that job were the members of the then Republican-led Senate Committee on Banking, Housing, and Urban Affairs, chaired at that time by Republican Sen. Richard Shelby (http://en.wikipedia.org/wiki/Richard_Shelby).

How does this tie in with the subprime crisis? Well, as you pointed out, the great majority of that crisis was from private institutions, such as Countrywide, that took advantage of historically low interest rates to borrow "cheap money" to invest into subprime mortgages.

Under Raines, Fannie Mae wasn't heavily involved in the subprime market, but after he left, Mr. Mudd took Fannie Mae heavily into the subprime market (http://www.washingtonpost.com/wp-dyn/content/article/2008/08/18/AR2008081802111_pf.html), boasting in 2006 that expanding its involvement in the market for subprime and other nontraditional mortgages was a step "toward optimizing our business."

Mudd said he worried that while the company focused on its accounting problems, "the business itself would get away from us." He said the company avoided that pitfall but now faced another: intense competition from "usurpers and innovators."

In Aug. 2008, Fannie Mae reported that bad -- largely subprime -- loans from 2006 and 2007 accounted for almost 60 percent of its second-quarter credit losses.

So, yes, I agree with Republicans who criticize Democratic oversight -- or lack thereof -- of Franklin Raines' generally corrupt and venal accounting practices. Pretty much all of the videos that they have on the web of Democrats pretty much saying "ignore the problems" at Fannie Mae dated back to the 2004 Raines hearings. Clearly, the Democrats were slanted in favor of what was, essentially, a Clinton-era Democratic political appointment, but the point is, they were defending cronyism -- as both parties are prone to do -- as opposed to defending irresponsible subprime practices, which happened under Mudd's tenure.

When the Republicans took over control of the Senate Committee on Banking, Housing, and Urban Affairs between 2003 and 2007, they were ultimately responsible for oversight of Fannie Mae. And well... they blew it, bigtime.