Elf Sternberg

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. ( They weren't ) 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.