> Notably he did speak up about Fannie and Freddie in the early 2000s but was silenced by the GOP's drive to make war
Wrong. Fannie and Freddie were protected by Dems, not Repubs. Mccain got his teeth kicked in over this one.
Interestingly enough, Fannie and Freddie execs during that time were largely Dems, most of whom who landed in the Obama administration. While at Fannie and Freddie, they took out millions.
Oh, and during this time, Fannie and Freddie were lying about the mortages in their portfolios, which threw off everyone's risk evaluation. (Their portfolios contained far more subprime than they admitted to.)
If Fannie and Freddie weren't politically connected GSEs, folks would be in jail.
Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it, and he spent his political capital trying to convince people that a war was necessary.
He spent 99% of his political capital on war and at best 1% on everything else. He was far from powerless, having control of both houses of congress. The fact is he was perfectly fine with the GSEs being someone else's problem so nobody would get distracted away from the "war".
Incidentally the GSEs were taken off government books in order to make the budget look better so we could "afford" the Vietnam war.
> Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it
In this matter, Bush's sins are sins of omission - as you point out, he didn't do anything. Dems did something, but what they did was wrong. For example, they actively protected Fannie and Freddie. Those are sins of comission.
Note that Bush didn't change the regulatory structure - he went with what Clinton left him. Again - omission vs comission.
It's the difference between manslaughter and murder.
And, that's ignoring ACORN's role. Among other things, they picketed banks that didn't make enough loans to folks who couldn't afford them. They tried to intervene with regulators. And so on.
Yes, Bush might have been able to keep this from happening, but he would have been fighting Dems the whole way.
He didn't fight. They pushed bad policies. There is a difference.
And, I note that Barney Frank is still in office and Gorelick, among others, are in the Obama administration.
It was in Bush's clear interest make the economy appear to be strong in spite of the war and the resulting extremely high gas prices. The only way he could do this was by creating a bunch of paper wealth for average Americans via a housing bubble.
That we were in a period of historically exceptional housing price growth was obvious to everyone at the time. I heard many people claiming to be the next Warren Buffet b/c their house had appreciated 20% in the past year.
The question we need to ask is, why were there initial calls to attend to the GSEs in 1999, 2000, 2001 but none after? I'd argue that it's because a) the extent of the problem was realized and those in power figured they'd let another president deal with it, b) those in power wanted to focus on their own agenda which didn't involve cleaning up the GSEs, or c) both.
> It was in Bush's clear interest make the economy appear to be strong in spite of the war and the resulting extremely high gas prices.
Yet he did nothing, except that he did (see below), and what he did was counter to the above claim.
> The question we need to ask is, why were there initial calls to attend to the GSEs in 1999, 2000, 2001 but none after? I'd argue that it's because a) the extent of the problem was realized and those in power figured they'd let another president deal with it, b) those in power wanted to focus on their own agenda which didn't involve cleaning up the GSEs, or c) both.
You're forgetting Bush's bid in 2003 and McCain's bid in 2005. (The 2005 bill was actually considered in 2006.) So much for the "none after" theory. (Google "2005 mccain fannie freddie")
The evidence suggests that neither of the above theories was a major factor, that the driving factor was that every effort to deal with GSEs showed that it was an unwinnable fight. The populists wanted folks to get mortgages even if they couldn't afford them.
FWIW, during their brief tenure in the senate, Senators Obama and Clinton got more money from Fannie and Freddie than the chairmen of the relevant committees. In fact, their totals (over their entire tenure) were approaching the totals of those chairmen, even though the chairmen had been getting such donations for decades longer.
I don't give campaign promises much weight in this discussion. You are correct that both McCain and Bush paid lip service to the idea, but Bush, the guy who could do something about it, didn't do anything.
You can try to argue that Bush -- the guy who had control of both houses of congress and was able to sell an unpopular war -- was politically powerless do do anything, but that's just not persuasive. He decided not to make it a major issue... and he benefited tremendously from that decision... America felt rich while we waged a very expensive war and paid $5 per gallon for gas.
To use an analogy, maybe it was a Democrat who lit the cigarette and fell asleep, but it was Bush who saw the smoke, mentioned that a fire might start and then completely ignored it until it became a blazing inferno.
(I am not a member of either party so I am not intending to absolve Democrats of their share of the blame... but in this case I think most of it rests firmly on Bush's shoulders).
By the way, this was right before Mankiw got fired:
> I don't give campaign promises much weight in this discussion.
Huh? 03 wasn't campaign season. And Mccain wasn't running for re-election every time he went after Fannie and Freddie.
I'm not claiming that Repubs, notably Bush and McCain, did a lot - I'm pointing out that they did do what you claimed that they didn't do. And, that they weren't pushing the other way, as Dems were.
As I've written before - manslaughter vs murder.
> You can try to argue that Bush -- the guy who had control of both houses of congress and was able to sell an unpopular war -- was politically powerless do do anything, but that's just not persuasive.
I'm not claiming that he was powerless. I'm claiming that he didn't care that much.
However, there's a huge difference between that and throwing gas on the fire.
> To use an analogy, maybe it was a Democrat who lit the cigarette and fell asleep
Except that that's not what happened. Dems insisted on pouring gas on the fire and fought anyone who tried to intervene.
Bush didn't fight back much. That's wrong, but it's not nearly as wrong as actively pushing bad policy.
> He decided not to make it a major issue
true
> and he benefited tremendously from that decision
false.
He didn't take a hit for trying to deal with it, but that's not the same as benefitting. And, Dems did benefit from it.
I don't think we share enough common ground to reach agreement. I am surprised you don't see how Bush benefited from deciding to ignore the GSE's misconduct.
I agreed in couple of messages that Bush benefited so it's disheartening to see you claim otherwise repeatedly. Do you find that misrepresenting what other people say is helpful in reaching agreement?
Lots of people benefited, but that doesn't make them as culpable as folks who pushed and defended the GSE's misconduct.
Plus, Bush did make some attempt to try to rein in the GSEs. Yes, he could have done more, but again, that distinguishes him from folks who opposed those efforts.
Surely you're not arguing that "Bush was a disaster on the war" implies "everything bad that happened is completely Bush's fault"?
There is plenty of blame to go around, but one of the biggest mistakes leading up to the financial crisis was significantly lowering the amount of cash reserves the investment banks needed to keep on hand. That happened on Bush's watch with Republicans in charge of every branch of government.
And the revoking of Glass-Steagall under Clinton? That was introduced by Republicans in both the House and Senate, with the Senate vote being almost entirely on party lines. Yes, Clinton signed it, but it was a Republican bill.
Some of the "too big to fail" issues we saw was definitely because companies got into multiple lines of business that Glass-Steagall would have prevented.
> Some of the "too big to fail" issues we saw was definitely because companies got into multiple lines of business that Glass-Steagall would have prevented.
Those "other lines of biz" provided some diversification that gave them some chance of survival. It also made it possible for banks to save some of the trading firms.
Wrong. Fannie and Freddie were protected by Dems, not Repubs. Mccain got his teeth kicked in over this one.
Interestingly enough, Fannie and Freddie execs during that time were largely Dems, most of whom who landed in the Obama administration. While at Fannie and Freddie, they took out millions.
Oh, and during this time, Fannie and Freddie were lying about the mortages in their portfolios, which threw off everyone's risk evaluation. (Their portfolios contained far more subprime than they admitted to.)
If Fannie and Freddie weren't politically connected GSEs, folks would be in jail.