Who is to blame for the financial crisis?
Kevin Hassett reports at Bloomberg
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.
Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.
As Alan Greenspan warned:
If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”
What happened? Despite moves from Republicans such as Chuck Hagel, John Sununu, Elizabeth Dole, and John McCain to get more regulatory oversight on Fannie and Freddie, Congress took no action. Why? Fannie and Freddie had already co-opted Chris Dodd with over $130,000 in campaign contributions over 20 years, and over $120,000 to Barack Obama over less than four years. Hillary Clinton took tens of thousands in eight years, and Chuck Schumer also opposed any new regulation on markets that Congress had forced open.
We can play blame games for the next several months and years, but what would be the point? In this case, there is a point, and it couldn’t be more clear or important. We have two candidates running for President who would bring much different styles to executive authority over regulatory responsibility. Barack Obama and his allies took the money and stayed on the sidelines rather than take proactive action to resolve the credit crisis. McCain and his co-sponsors of this bill had the right idea and instincts, but could not get any cooperation from Clinton, Schumer, or Obama.
Does this mean that Obama gets the entire blame for the financial crisis? Of course not; it’s shared among many people who failed to act, and some who acted poorly to create the problem in the first place by mandating loans to ill-qualified lenders and then allowed those loans to form the basis of widely-traded securities. McCain doesn’t become the sole protagonist in this morality play, either. However, this demonstrates the qualities of both judgment and leadership of both men ” and those two qualities are critical for determining which man should be running the executive branch for the next four years.
The Anchoress:
The financial crisis that startled congressional partisans to near-silence last weak has already dulled enough for some political maneuvering to appear. The very people who helped to create this crisis now want to “oversee” the bailout. Others object and say – quite rightly – that one person should not have that much power. Leaders who last week squawked, “no one knows what to do,” suddenly want to pretend they have the answers; more money! To the trillions of dollars we’re spending, let’s spend even more. That’s pretty scary.
The GOP – taking a very big risk, here – is taking their chances with the dubious press; they know if they argue with the Democrats it will be reported with venom as “obstructionism”, and played up to the hilt in this election, but they’re going to argue, anyway, and they are right to. This is far too serious an issue for the political sandbox. We can’t afford another mistake.
September 22, 2008 - 06:45 PM on September 22nd, 2008
Gee wizz…. Considering the GOP ran the congressional table for 12 years straight and had a monopoly on both executive and legislative branches for 6 of those years, it’s a ocean sized leap to suggest the blame for the housing crash lies anywhere but at the republican doorstep. Further, state banking/insurance commissioners held their annual conference in DC in years 2003 and 2004, drafted a letter to the Whitehouse expression their deep concern over the wild west financing. Response from Whitehouse? Silence.
Good luck pinning the housing scam on anyone but the GOP. You’re gonna need it.
Oh yea… Did I mention stripping the Glass Steagall Act by none other than Sen. Philbert Gramm? It was called the Gramm-Leach-Bliley Act. Republican sponsored in a republican house and republican senate.
Yeah…. good luck.
September 22, 2008 - 09:30 PM on September 22nd, 2008
Biscuit..
Were you in a coma for during the last 8 years? Go back and look at the history of the party power or the last 8 years.
September 22, 2008 - 10:07 PM on September 22nd, 2008
Of course it is the fault of Bush, but there is plenty of Republican blame to go around! Speaker Pelosi and Sen. Reid have worked very hard to stamp out the Republican Culture of corruption, but they have only had two years to do it and the roots go much deeper.
Virtually everything that has gone wrong is the Republican’s fault, we know that to be fact. They caused Katrina because the global warming is their fault. They caused the housing crisis because of their greed. Noe they have caused the mortgage and credit crisis because their rich friends in the mortgage business enticed poor folks into taking out mortgages they could not afford! For years the Democratic leaders urged restraint, but the rich Republicans sensed a quick profit and coerced the poor into signing their lives away!
So yes Biscuit is right! It is Bush’s fault first, then all the Republicans and Halliburtin’s fault!
September 29, 2008 - 11:06 AM on September 29th, 2008
Pam are you STILL in a coma?
The Republicans have controlled all three branches of goverment for the last 8 years. They controlled the congress for 14 years. They were large and in charge. Biscuit is right on the money.
September 29, 2008 - 11:21 AM on September 29th, 2008
Take an ammonia inhalant and wake up please!!! It is clear that the actions taken in 1999 http://banking.senate.gov/conf/under Bill Clinton was one of the pre-cursors to today’s problems. This idea that everyone is entitled to the American Dream of owning a home is flawed, since the caveat should be that you have to work and pay for it. The Democratic agenda to allow lending houses to make these risky loans was the next part of the problem. Finally, despite the warnings of Alan Greenspan, the Bush Administration, and many Republican congressman, Fannie Mae and Freddie Mac were not reigned in because of the Democrats in Congress! http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0
And thean, don’t forget Franklin Raines, Clinton’s former budget director, and his debacle at Fannie Mae! http://seattletimes.nwsource.com/html/businesstechnology/2004358433_webraines18.html
Now, wake up people!!!
September 29, 2008 - 12:37 PM on September 29th, 2008
GhostMike…WHO is Speaker of the House? WHO is Senate Majority leader? WHAT is their party?
And can you explain just how the Republicans control the judiciary branch?
Now, care to reword your statement about the Republicans controlling all 3 branches for the last 8 years?
Actually, you deserve two:
September 29, 2008 - 12:40 PM on September 29th, 2008
In a nutshell, here’s who to blame:
DemokkkRats
Klinton
Looters and Frauders
September 29, 2008 - 02:26 PM on September 29th, 2008
And let’s not forget that although the reps lost the majority in the Senate in 01′ due to Jeffords.. Daschle took control from 01 to 02
February 5, 2009 - 08:00 PM on February 5th, 2009
The
5 members of theBoard of the Federal Reserve Bank of the United States of America:
Ben S. Bernanke, Chairman
Donald L. Kohn, Vice Chairman
Kevin M. Warsh
Randall S. Kroszner
Frederic S. Mishkin
What a lovely group photograph they make, quite remarkable actually. They all share something else in common besides being the Board of Governors of the Federal reserve bank. They are all Jewish, what a remarkable coincidence.
Bernanke http://www.nndb.com/people/447/000094165/
Kohn http://www.nndb.com/people/073/000169563/
Warsh http://www.nndb.com/people/074/000169564/
Kroszner http://www.nndb.com/people/681/000161198/
Mishkin http://www.nndb.com/people/075/000169565/
Now what are the chances of that, “all being equal”? Well if you estimate the Jewish population of the USA to be around 3% that means the chances roughly of there being just one Jew among these is around 6 or 7 to one, the chances of 2 around 54 to 1, the chances of 3 around 600 to one, the chances of 4, around 9,882 to one and the chances of all 5 about 326,128 to one (mathematical calculations done by myself, please correct if wrong).
Now I know it’s totally anti-semitic for me to point this out but doesn’t it suggest something is wrong? I wrote “all being equal” but clearly it’s not, what we have here are Jews appointing other Jews to important positions, clearly not necessarily the best person for the job.
Supposing these were 5 Muslims, do you think someone would have noticed by now?
Things are about to go wrong big time in the USA, money supply is estimated to be increasing by 18% per annum, I wonder who the Americans will blame?
February 6, 2009 - 10:30 AM on February 6th, 2009
It is a remarkable “coincidence”…?