Pardon me for being slightly frustrated, but I am so tired of hearing people, especially Obama, blame the Bush administration for our current economic woes. Did the congressional republicans overspend when they were in power? Absolutely! Did Bush spend a lot going to war with Iraq? Definitely! Whether or not you agree with rationale for all of this spending, republicans did overspend when they were in power. But before we talk about why we are in this mess, let’s look at a graph from the non-partisan CBO (Congressional Budget Office).
Notice how much Bush spent on an annual basis. When you aggregate all of his spending, you get the 2 trillion dollar budget deficit that you hear Obama speak about constantly. And it’s true, Obama did inherited a huge budget deficit.
Now disregarding the CBO estimate (red line), let’s just look at Obama’s projections of his own spending and let’s add his up solely through 2016 (if he were to be in office for 8 years). He will more than triple the budget deficit to 6.7 trillion after 8 years in office, making Bush look like a penny pincher. And this is using his own estimate. If we use the CBO’s estimate (which is probably more realistic) for the same time period, he quadruples it to almost 8 trillion. I don’t want to hear him complain about a 2 trillion dollar budget deficit anymore, because he is going to bankrupt our country at this spending rate.
Now, for all of you who continue to blame our current economic recession on Bush, let’s look at some facts. The mortgage industry did go BOOM in 2008, but this was a bomb that was set back in the 1970′s and then tinkered with in 1995 by Clinton and his cronies, well before Bush was ever in office:
Our present crisis began in the 1970s, during the Carter administration, with passage of the Community Reinvestment Act to stem bank redlining and liberalize lending in order to extend home ownership in lower-income communities. Then in the 1990s, the Department of Housing and Urban Development took a fateful step by getting the GSEs to accept subprime mortgages. With Fannie and Freddie easing credit requirements on loans they would purchase from lenders, banks could greatly increase lending to borrowers unqualified for conventional loans. In the name of extending affordable housing, this broadened the acceptability of risky loans throughout the financial system.
What, you don’t believe Barron’s? Let’s hear it from Obama himself:
Subprime lending started off as a good idea – helping Americans buy homes who couldn’t previously afford to. Financial institutions created new financial instruments that could securitize these loans, slice them into finer and finer risk categories and spread them out among investors around the country and around the world.
The CRA was created to push risky loans to people who normally could not afford them. What a great idea! Let’s give loans to people who can’t pay them back. What, still having trouble believing the government would step in and push banks to give risky loans? Here’s a little more insight into this from a former Bank CFO:
The CRA, and a host of related government lending regulations, coerced (forced) banks to make marginal or bad loans to people with low-income, unstable income, and/or poor credit histories. By supporting these laws and regulations politicians pleased special-interest groups. Politicians were repaid for their efforts with large voting blocks.
I remember a meeting with the senior executive team of our bank in which federal examiners told us that we had to make a large number of “marginal loans.” In this meeting the Chief Executive Officer (CEO), Chief Operating Officer (COO), and I (the Chief Financial Officer) sat in stunned silence as the federal examiners told us what we must do.
With a stack of loan files (loans we had planned to reject) in front of them, the federal examiners told us these “marginal” loans must be made to improve our CRA rating. While CRA did not mandate civil or punitive damages, CRA required a four-tier rating system with performance levels: outstanding, satisfactory, needs-to-improve, or substantial noncompliance. These ratings were made public. The bottom two ratings meant public outrage. Satisfactory was not “satisfactory” because some of our competitors were already advertising their outstanding rating.
Like hundreds of other banks around the country, we were forced to comply with the government’s attempts at social re-engineering. Banks across America originated these loans and then sold them in the secondary market.
Remember Fannie Mae and Freddie Mac? They were buying up these subprime loans which helped move this risky loan business into full throttle. Since the government owned Fannie and Freddie, it was like the government was insuring these loans buy purchasing them.
So, where does Bush fit into this? Oh right, deregulation caused this mess. Let’s look back at the Barron’s article:
CONTRARY TO A VIEW POPULARIZED DURING THE 2008 presidential election season, the current economic crisis was not the result of deregulation.
The Bush administration made many mistakes, but deregulation was not one of them.
Not only was there no major deregulation passed during the past eight years, but the Bush administration and a Republican Congress approved the most sweeping financial-market regulation in decades.
The bipartisan Sarbanes-Oxley Act was enacted in 2002 to prevent corporate fraud and restore investor confidence after the collapse of Enron and WorldCom. It failed to prevent the accounting fraud and influence-peddling scandals at Fannie Mae and Freddie Mac. And even after those scandals were widely understood, regulators sent Fannie and Freddie back into the market to continue buying subprime loans, lending and borrowing with implied taxpayer backing.
So Bush actually approved “the most sweeping financial market regulation in decades.” But I don’t think I’ve ever heard Obama admit that. And do you want to know who resisted the regulations that Bush was trying to push onto the financial sector to cut the wires of this time bomb? This 8 min video from 2004 shows the fight that went on in congress about this:
Did you notice anyone in this video who resisted these regulations, and are now the ones blaming this whole mess on the Bush administration? In fact, in 2004, according to Karl Rove, the Bush administration got a regulatory bill through the senate finance commitee, only to have it filibustered by Chris Dodd. I’ve said it before, that if double standards were water Washington would be drowning. In fact, Chris Dodd may be drowing now because of all of his abuses.
So it wasn’t the war spending or the congressional spending that got us into this financial mess. It was in fact the subprime mortgage bubble bursting that has led us into this economic recession. So despite the populist rhetoric that Obama keeps repeating, Bush has little blame for this economic crisis than other parties still in power.
But if you must blame Bush for something, outside of a large budget deficit that Obama has already doubled, then let’s not forget about 2008. Under the helm of Bush and a democratic congress, they decided to spend a fair portion of that 2 trillion dollar budget deficit in one fail swoop in approving a 700 billion dollar bailout package for the banking industry. They only spent half of it under Bush, but they approved the entire amount. So if you are going to blame Bush for something, there you go.
But there is one final point that Ed Morrisey so eloquently made a few days ago regarding Obama’s continual blaming of this economic crisis on the previous administration:
Democrats controlled Congress in 2007 and 2008, and had plenty of opportunity to cut the budget and reduce spending to trim the deficit. Did they do so? No; in fact, they increased the budgetary spending at a rate higher than that of the Republicans when the GOP controlled Congress.
And even more, the 2009 budget wasn’t Bush’s at all. The Democrats held up most of it, outside of defense spending, in order to wait for the next President. Instead, they passed continuing resolutions until pushing through the omnibus spending bill for the 2009 budget — which was signed by President Obama this month.
More to the point, Barack Obama was a member of Congress during the last four years. What did Obama do to reduce the deficits as the Senator from Illinois? What legislation did he author? What opposition did he provide to the high-spending policies of Nancy Pelosi and Harry Reid in 2007 and 2008?
If the answer is nothing — and it is — then Obama inherited the fruits of his own inaction and the burden of his own party’s policies.
So as the title indicates, President Obama, please tell the American people the truth about why we are in this recession and stop spouting populist blame just so you can continue to win the approval of the American people which you need to push your heaving spending agenda. Instead of taking advantage of a crisis, please let it go to waste. We want our country to thrive again, and more than that we want honesty and integrity in our government and in the Office of the President of the United States of America.