George W. Bush sat down with Charlie Gibson for an interview at Camp David recently. He seemed much more congenial, less combative than he has in most interviews in the past few years. Kind of like the old George Dubya that so many Americans voted for in 2000.
Among the questions Gibson asked him was whether or not he missed any warning signs that an economic meltdown was about to occur. Bush deflected any blame, noting that he was “sorry it’s happening, of course,” but that “I think when the history of this period is written, people will realize a lot of the decisions that were made on Wall Street took place over a decade or so, before I arrived in President, during I arrived in President.”
So that “decade or so” would include eight years of George W. Bush, and two years of the Clinton administration. So who would you hold responsible?
I guess it’s always the Democrats and the Clintons for some people.
These are the same people that say it only took the Democrats two years of rule in Congress to kill the economy. Actually, if you want to believe the Democrats’ recent control of Congress is responsible for the current economic mess, you have to actually believe that they ruined it in less than a year, since the National Bureau of Economic Research released a report on Monday, December 1st noting that the current recession actually started in December 2007.
So if I’m to understand this correctly, the Republicans had total control of government from January 2001 until January 2007. At the end of January 2007 the Democrats came in and almost immediately set about plans to turn the country toward the third worst recession since the Great Depression. Remarkably, they accomplished this in a matter of ten months. Incredible. If only they’d put all their fantastic resources toward good instead of destruction.
Of course, Bush is probably referring to the 1999 repeal of the Glass-Steagall act, a move championed by Republicans, most notably former Senator Phil Gramm who led the Senate Banking Committee at the time.
That one act probably set the downfall in motion, but George W. Bush very conveniently has a short memory. Check out this October 2004 article from the Boston Globe entitled, “Zero-Down Mortgage Initiative by Bush is Hit.”
President Bush’s weekend campaign promise that he will push legislation allowing for no money down on some federally insured mortgages could cost taxpayers as much as $500 million over four years because of a higher rate of defaults, according to the Congressional Budget Office.
The election-year idea may appeal to those who can’t save as fast as home prices are rising. But some financial planners warn that increasingly common no- and low-down-payment programs can be ruinous for some consumers — especially if home values decline.
I think most of us would think $500 million would be a bargain right now. However, 2004-2005 is right around the time that the CDO market started maturing, if you can call the massive development of a dangerous shell game “maturing.” According to Wikipedia, the Securities Industry and Financial Markets Association claimed that aggregate global CDO issuance totaled $157,000,000,000 in 2004. By the end of 2006, this market had grown in size to almost $2,000,000,000,000 (that’s from $157 billion to $2 trillion, but I thought it looked more dramatic with all those zeroes).
I wrote about this in a previous article, but I think Sam Seder and Marc Maron explain this whole game perfectly in the video below. Sam & Marc have a one-hour show every day at 3pm on the internet at http://www.maronvseder.com. An audio podcast is available on iTunes. It’s a great show, probably the funniest on the “internets,” and it’s informative too. What more could you ask for?