How Bush trashed the economy

And thank you, Rod, for encouraging people to vote for him. Twice.

Governing within ideological constraints is always a bad idea, whether the constraints are imposed by Marx and Lenin or by Milton Friedman and Phil Gramm.

Worst president ever? Nowhere near as bad as LBJ or Carter.

I'm afraid BushCo can do a whole lotta damage in 50 days. Because that means we still have Paulson at Treasury. And Bernake.

It's not Bush, it's us.

Case study #1...

Fossil fuel based agriculture= works in the short run, disastrous in the long run

Case study #2...

Trusting in the "free market" is great= until that idol doesn't deliver the goods and then we sacrifice more and more

Case study #3...

USA military spending exceeds the next 45 nations combined... while we do little to help people in marginal nations like Afghanistan and the borders of Pakistan where we should be draining the swamp where the mosquitoes of terrorism breed by supporting education, especially for women.

Bottom line...

All of us, across party lines, are asking Cain's question without embarrassment, "Am I my brother's keeper?" (posed in a tone of voice expecting a "no" answer)

We are the problem. We need to repent, unlearn, rethink everything... and convert away from our idols to the Living God.

Minority opinion,

Duh-sciple

Can a President give himself a Presidential pardon? (He is the 'Decider', after all.)

Watch for it ...

You partisans are either ignorant, or stupid, or both. Do you REALLY believe, for a nanosecond, that this mess happened because of the bad GOP, and had nothing to do with the DEMS? If you believe that, then you are most surely an idiot of huge proportions. It took all of them to make this mess, both "sides." In truth, there are not two sides at all; they are one and the same, an illusion of democracy, one party of money. Dodd, Frank, Schumer, the heads of the GSE's, even the great Obama himself, ALL on Wall St.'s payroll. If you imagine differently, you need to read more. The more you read, the more you find that they are all dirty dirty dirty. Astonishingly dirty. Rubin played a part in deregulation, as did Gramm. Bush is incompetent, but the CRA came during a DEM administration. They're all owned by the FED. We're all owned by the FED.

You think things are going to change in January? Is Obama going to abolish the FED?

Ah-ha! What I didn't know about html. Don't use pointy brackts except when you need them. Above I meant to say :

"Why do Americans (fill in the blank)", when it is actually the media making loud noises to make themselves feel important.

and

The Dems block every move of the administration to strengthen regulations, to bolster social security, to (fill in the blank again), but when it doesn't happen, it is Bush's fault.

http://www.ibdeditorials.com/IBDArticles.aspx?id=313027333411197

IBD responds to the above mentioned story...

Rod needs to learn how to actually assign real blame where it really belongs, with 100% intensity 100% of the time. Who? The crooks who will be running the show.

Typical AP..
---
BTW, 2638 Days since 9/11, and still no follow up on US soil.
Thank you, President Bush!!!!!

"Remarkably prescient"?!! A chimp on pot could have seen this coming. Years ago I read the stat that something like 80% of new home loans in California were interest only. How could anyone NOT see that was insane? Overnight we bent over and became a nation of renters. Everyone saw this coming. Everyone. Oodles of us just pretended we didn't. If Bush is the worst president ever, and he may be, we're the worst Americans ever. He's just one of us.

The first time I heard subprime mortages explained, I literally said, "This is a train wreck waiting to happen."

I couldn't have imagined just how colossal a wreck it would become...partly because I could not have imagined that even the stupefyingly inept and stunningly arrogant Bush Administration would cling to the notion that untrammeled greed would lead to good results. We put Gordon Gekko in charge with his mantra that "Greed is good."

My rule of thumb has always been that "Greed makes you stupid."

But I'm just a small town preacher and not an economic "expert" or master of the universe like the people who were driving this runaway train.

Rod is engaging in some parody here with his comment ("worst President ever") and attempt to ascribe all this economic news to Bush. The parody is of all the folks who've been suffering from B.D.S. these past eight years. After all, can anyone in their right mind blame just ONE MAN for all this? Why not blame the snowy weather we're having in the Midwest on the WH occupant while we're at it :-(

Rod, we get the joke -- and your point.

The thing about Bush and republicans that is rarely discussed is the real reason why they looked the other way during this huge real estate and debt runup. It is because the jobs economy in this decade fell apart due to the outsourcing of the white collar jobs, enabled for the first time thanks to the internet. Bush and Republicans were joined at the hip to the most conservative free market economists such as Mankew from Harvard, who just couldn't move away from their dogma even as we lost 100K jobs/mo in a "boom" at the beginning of the decade- all the while even some Reagan era economists were having second thoughts about this free market thing. Observing the greatness of a totally free market even as the US economy failed to create jobs, Bush had no economic agenda to tout but home ownership. I think the real problem is the right's complete unwillingness to modify their conservative beliefs when the real economy performs differently then their textbook model. Now we have Obama, and he is going to swing too far the other way with trade, and republicans will be known for some time as the party of job losses and wage stagnation.

"Rod supports Bush...twice...then realizes how bad that choice was after the fact.

Rod supports the Iraq invasion...then realizes how bad that choice was after the fact.

Rod supports McCain's choice of Sarah Palin...then realizes how bad that choice was after the fact."

And given that five Orthodox clergy were convicted of child molestation in the Austin, Texas area alone, I have to think Rod is not a theological genius either. But Rod is right about one thing. The Benedictine option might work for him. He just needs to restrict himself to a community smaller than St. Francisville. If there were a perp walk for pundits, Rod would be included.

For his good and his readers'.

"If there were a perp walk for pundits, Rod would be included."

I wouldn't go that far. But I think it is worth noting that Rod's foresight seems rather poor, but his hindsight is excellent. We would do well to keep that in mind as he makes prognostications about the coming administration.

Given

1) the silly American notion that homeownership is always & everywhere an unalloyed good; and

2) the recent mass insanity of presuming perpetually-inflating house prices

...regulation that tended to make it more difficult to finance home purchases was a political non-starter - no matter which party was in office. What, you're against increased homeownership, particularly by the poor & minorities? Why don't you trash mom & apple pie while you're at it? And why bother with regulating so-called "bad loans", since even mortgages guaranteed to default become profitable with perpetual housing inflation....

Pyrrho @ 8:56 AM writes:

“Simon: Megan McArdle had the last word several weeks ago on regulation as a cure-all for the economy's ills...
This is strawman bullshit. I can think of ten or twelve basic things we could do to curb financial excesses.”

Only 10 or 12 ? Get thee to thy coffee-pot, my friend; you’re obviously not quite awake yet.

The current mess isn’t just Bush’s fault. It’s not even primarily Bush’s, or Bush’s Administration’s fault. Remember, it was the “lending community” that actually asked for and secured permission to make all these subprime loans. The ratings agencies gave the securities based on these subprime loans AAA status. The Congress joined in with its massive-but-unspoken support for Freddie Mac and Fannie Mae. And let’s please, please, PLEASE not forget the ignorant fools who actually took out the loans.

Our current set of difficulties were the result of a cooperative effort, fueled by the Human will to believe. People wanted to believe they could remove risk from the investment equation. People wanted to believe they could leverage assets at 30-1 and not lose anything. People wanted to believe they could get a $ 400,000 house on a (combined) household income of $ 30,000 a year.
But sooner or later, just as the water is wet and just as the fire will burn, “The Gods of the Copybook Headings will, with terror and slaughter return.”

This problem was not difficult to foresee. It’s not even difficult to deal with, provided you’re willing to deal with a little hurt for a while. The central government is, however, firmly about the process of making it very difficult to avoid getting caught in the undertow.

Thanks, all you Happy Monkeys in the DC Office. Thanks a lot.

Your servant,

Lord Karth

"If there were a perp walk for pundits, Rod would be included.
"

What's the point of picking on one of the few people who will admit he was wrong? It seems all Rod gets for that admission is grief.
If we want to encourage people to admit their mistakes, we should reward that behavior instead of punishing it. Save the spleen for the people who are still spouting the party line.

Ironically, there were more same-sex marriages created than jobs under Bush. Talk about yer priorities, eh?

The AP, which has proven itself to be a partisan hack wire service, is trying to pin everything on Bush. Sorry, not buying. Bush said there should be reforms. Republicans back in '04 (no dem majority, for those who don't know) held hearings about problems at Fannie Mae. You can see CSPAN footage of such. And on that same footage you'll see democrats denying up and down that there were any problems at Fannie. They even accused the republicans who pointed out the problems at Fannie of LYNCHING. (They always find racism under every rock). Stupid, yes, but that's what your democrats in the House were doing. McCain and other Rs in the senate tried to get reform but needed one dem vote on the committee and didn't receive one vote to reform Fannie. The AP is not interested in reminding everyone else about these invconvenient truths, so you can read it here. But to simplistically blame it all on Pres. Bush is erroneous. I remember just a month or two ago Harry Reid said "No one knows what to do". His bunch WAS and is running things by now. Does anyone really think the democrats, who did SQUAT to avert anything for the last two years, really have a clue what to do now? And you want them running your health care? Are you crazy??

Michelle Harris
The thing about Bush and republicans that is rarely discussed is the real reason why they looked the other way during this huge real estate and debt runup. It is because the jobs economy in this decade fell apart due to the outsourcing of the white collar jobs, enabled for the first time thanks to the internet. Bush and Republicans were joined at the hip to the most conservative free market economists such as Mankew from Harvard, who just couldn't move away from their dogma even as we lost 100K jobs/mo in a "boom" at the beginning of the decade- all the while even some Reagan era economists were having second thoughts about this free market thing. Observing the greatness of a totally free market even as the US economy failed to create jobs, Bush had no economic agenda to tout but home ownership.

People really need to realize this is what happened. The economy started slipping in 2002 or so, and no, it wasn't Bush's fault, or 9/11, or Clinton. It was just something economies do.

Instead of letting that happen, however, as real wages slipped downward, the country mysteriously started buying everything on credit that it couldn't afford, so everyone was able to pretend everything was fine. What's more, housing prices started skyrocketing, so people 'had more assets' despite the fact it was the exact same house they'd always lived at and their savings account was now dry.

Pop quiz: If you had a fully paid off house worth $150,000 and savings of $50,000 in 2000, and in 2007 had a house worth $250,000 with $40,000 borrowed against it and no savings, are you better or worse off? In 2000 you had 'assets' of $200,000, whereas in 2007 you had assets of $210,000, so logically you're better off, right? (Or, at the same place after inflation.) Now what if it was the same house?

Millions of people fell for this, and it's been propping up Bush's economy the entire time he's in office. And then the value of their house slide back down to $150,000, with a $40,000 loan against it they had no hope of paying off.

But that isn't the disaster, the disaster is that in the last seven years they had to burn through $15,000 dollars worth of savings a year to stay afloat because their wages went down relative to inflation. Housing prices increases just made people ignore it, which is why suddenly everyone is dissatisfied with their economy condition...everyone already was dissatisfied, but thought that they had managed, or would manage in the future, to make an equal amount of money via their house. When it became obviously they would not, BAM, the last decade hit them all at once.

I think the real problem is the right's complete unwillingness to modify their conservative beliefs when the real economy performs differently then their textbook model.

I'm reminded of the recent nonsensical speech by, I believe, Bernanke about how reality doesn't match truth or whatever, where it sounds like his brain is about to explode as he's forced to explain that the free market somehow, inexplicably, impossibly, appears to have in some manner that is unknown, ignoring what God/Ronald Reagan himself said about its infallibility, maybe failed us in this one specific instance, despite everyone knowing that can't possibly have happened.

Now we have Obama, and he is going to swing too far the other way with trade, and republicans will be known for some time as the party of job losses and wage stagnation.

Which, hopefully, will remove the nonsensical idea that Carter was somehow this horrible president. He admittedly wasn't the greatest president, but the right likes to pretend he was this horrible failure, and he wasn't.

DavidTC.

The Free Market NEVER FAILS. It was the efforts to control it, avoid it, and ultimately bypass it that have failed. The market's doing what the market was going to do.

Liberal foolishness has just come around to bite us, and it will be multiples worse precisely because of all the foolishness going on now and the abject foolishness of those in and about to take office.

"Your Name": The Free Market NEVER FAILS.

How would you know? If you ever find a market free of rent-seeking, please drop me a line. I'd like to check it out.

Re: This discussion, and Rod's original post, I highly recommend "The Shock Doctrine: The Rise of Disaster Capitalism" by Naomi Klein. I am reading it right now, and, while hers is probably the most left-wing perspectived book I have read in years, I think she is really on to something. From the jacket:

"In this groundbreaking alternative history of the most dominant ideology of our time, Milton Friedman's economic revolution, Klein challenges the myth of this movement's peaceful global victory. From Chile in 1973 to Iraq today, Klein shows how Friedman and his followers have repeatedly harnessed terrible shocks and violence to implement their radical policies."

Her main point seems to be that the greatest promoters of the free market were not able to compete in the marketplace of ideas without, at best, a thumb on the scale, and at worst, colluding with repressive regimes, and exploiting major crises such as 9-11, the Tsunami, Hurricane Katrina, or (since her book was published) the global economic meltdown.

She quotes Friedman: "Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

I dared myself to read it because I have been averse to "left-wing" perspectives for some time. I hope the "Free Market" disciples on this board will do the same.

"Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

Alicia - Assume, arguendo, that Friedman et al have exploited crises to push through their ideas. So what? First, the same could be said of much of the New Deal reforms. Second, and more importantly: If the ideas are good ones, then exploiting a crisis to push them through may be unseemly, but doesn't in itself detract from their utility. On the flip side, if they're bad ideas, then all the public support in the world won't change that fact.

DavidTC - I believe the "theory vs. reality" line comes from Greenspan, not Bernanke. I'm not a Fed watcher, however, so I could be mistaken....

Hi, Your Name. (BTW, you post a lot. LOL) In fact, Klein says that Friedman and the rest of the "Chicago School" of economists attempted to learn from what Roosevelt did in the New Deal.

The point to me is whether the "Free Market" ideology even works for its proponents. If the thumb on the scale is needed in order to enact those ideas, then to me that proves that even the proponents of the "Free Market" don't actually believe in it.

Good catch, Scott. I don't think crises and the fear that they engender should be used as an excuse for bypassing the democratic process.

I like Emmanuel, but I think there are definite problems with viewing a major crisis as "an opportunity to make political hay." In spite of the conventional Chinese wisdom about using the same character for "crisis" and "opportunity."

So Bush himself personally trashed the economy because he didn't tell all the banks, nanny-style, that he knew what was good for them better than they did and force them to comply? Are we supposed to make it illegal for anybody to make a loan deemed to risky by some group of ever-rotating bureaucrats?

And about these "proposed crackdowns on no-money-down, interest-only mortgages" that the Bush administration backed off of: Where do you think these proposals came from in the first place? Certainly not from the Democrats, who acted as enthusiastic promoters and stalwart defenders of Fannie, Freddie, and garbage loans in general, and accused all detractors of racism. Do you think the new Administration and the new Congress is going to do anything about that? Hell no. They're going to continue to shout down attempts at preventing crappy loans as "racist" while handing out truckloads of bailout money and obfuscating their role in creating this mess. Whatever "regulations" they come up with are going to be aimed at things like curbing the pay of those eeeeeeeevil CEOs, and not at actually preventing bad loans.

For those of you geniuses who think the meltdown is fundamentally the fault of the free market, let me ask you a question. Why did so many of the banks suddenly start making crappy loans in tandem?

Don't give me the simplistic, stock liberal answer of "greed". People have always been greedy. That's nothing new. Greed is just as good a reason *not* to make crap loans. Presumably a greedy person wants to get their money back, after all. What's different now, that wasn't the case before, that motivated all these banks to make stupid moves all at the same time?

The answer is: government interference that gave banks incentives to make bad loans, and that implicitly promised them a government-backed safety net (now being employed in the form of bailouts) should it all come crashing down. A bunch of government-employed idiots, who didn't understand how the market works, decided to try to game it so as make bad loans seem financially lucrative. And now that it has all ended in tears, many of you (including Rod), have become convinced that the answer is to give these same ignorant, too-clever-by-half pencil-pushers even *more* power to manipulate things. What makes you think that any actions they take now will be any less stupid than what they've already done?

It doesn't follow that a set of ideas, as a whole, will be applicable to the crisis, but it is possible that a crisis may be used to "ram that set of ideas through" even those that are not applicable. It's also likely that some of those ideas will work and some will not, and if they are considered a "package deal" that is tamper-proof then they will not, I think, be helpful or workable.

I don't disagree. My point is that we ought to focus on the (non)workability of the ideas themselves, not on the methods used to "ram them through".

Baldy, how come DEMOCRAT Barack Obama was suing Citibank via ACORN (his group heavily associated with vote fraud) to force them to make more bad loans???

Hi, MI (if you are still here). I would prefer to focus upon both the workability or non-workability of the ideas and on the methods used to "ram them through."

BTW, there is a fascinating profile of Naomi Klein in this week's issue of the New Yorker (the one with Obama interviewing for First Dog on the cover). The magazine was waiting for me when I got home from work last night.

When your only defense against presumed criminal behavior is to make signifcant numbers of loans in places where no or few qualified people live...

Of course, banks could already deny loans based on credit scores or location of purchased property or anything. If there were legitimate, objective reasons to deny such loans, there was no objection to that.

All the CRA did was stop them from denying homes based on where the applicant lived as an 'objective' measurement, which was introduced solely as a clever way to place minority neighborhoods in the areas they wouldn't loan to, which gave them an objective way to keep from loaning to minorities.

This was akin to refusing to loan to people who listened to hiphop. That is not, technically speaking, racism, if applied evenly against whites who did that and not against blacks who don't. But it is hard to see what the point is except discriminate against blacks. There is no legitimate reason to consider someone's residential address when looking at a loan for a property at an entirely different address. (What kind of house they live in, owned or rented, how much it is worth, yes. But the actual street address, no.)

The idea that it forced banks to make bad loans is just incredibly naive, no matter imaginary third-hand accounts you've heard. Especially since only about 25% of loans were actually made by banks covered by the CRA. (The CRA covered parts of 25% of other institutions, but they could just make loans using other parts and not bother with the CRA at all.)

And, it is, of course, worth pointing out that loans that would have been redlined except for the CRA are failing at a slight lower rate than other loans of the same type. (I.e., primes less than other primes, subprimes less than other subprimes.) In other words, the entire argument is moot because the CRA has resulted in banks having better loans, on average.

This is probably because there is still the touch of racism which is causing such loans to be scrutinized a bit more, and a few of the bad ones from people in formerly 'redlined' areas actually being rejected for legitimate reasons, like lying on the loan application, whereas other people just have their lies sail right through. (I.e, thanks to racism, people were willing to make stupidly reckless and dangerous loans to white people and not as much to black people.)

The number of these loans may not be the cause of our credit problems, but they still exist. Further, it was the RTC (Resolution Trust Corp) that invented the securitized mortgage market. Before them, it had never been heard of.

Yeah, and astonishingly enough, that system of securitizing loans worked for 70 years.

The real problem, though, remains the same: It was the belief that SOMEONE ELSE WOULD BEAR THE LOSSES that ultimately caused the problems. Whether it was the gaurantees from Fannie and Freddie, or the bundling of the bad poisoning the rest of the good, the problem is the same. Widespread assumptions about loss being someone else's problem.

Fannie and Freddie actually had standards, and yes, they shouldn't have been slightly loosened, although it's worth mentioning that they would have been in trouble regardless as home prices fell. They really should have put their foot down and refused to purchase obviously-inflated-home-price loans, or rather, someone should have made regulations allowing that. (I'm pretty sure they couldn't refuse to buy any loan that was 'conforming'.)

But that was, at best, a minor problem. Fannie and Freddie may have created a market, but when they assumed responsibility for loans, they actually assumed responsibility. If worse came to worse, it would just take them out...and it did, and we bailed them out. If they had been at the root of the problem, that would have been it.

Problem over. They were designed to remove good loans from the market, and they did, for slightly lax standards of 'good'. Any problem with them, by definition, would not affect the market on the home loan side, and if the government backed their securities, which it has, it wouldn't cause a problem on that side either. They were a magical black box that turned loans into perfect securities, and have continued to do so, although now they're doing it at taxpayer expense. This couldn't be harming the rest of the market in any manner.

However, the trading of loans and securities of those loans and 'insurance' that isn't really insurance among banks in a rather delusional and totally unregulated manner meant that, unlike the Fannie and Freddie loans, the risk never left the financial market, but banks were allowed to pretend it had somehow. That is the current problem. It was a game of hot potato where everyone started with hundreds of hot potatoes and just traded their potatoes with everyone else and considered the matter settled.

This is obviously extremely stupid and shouldn't have been allowed. Banks have rules about how much capital they have to have, and how much risk they can have, and they shouldn't been allowed to pretend they had no risk and imaginary capital. But it was, thanks to lack of regulations. Lack of regulations the Republicans were praising and supporting to high heaven.

Baldy, I'm very grateful that someone besides me is willing to acknowledge that a law, CRA in this case, was implemented contrary to its intended purpose. I just want to add that no one really forced banks to pad their CRA scores, if you consider that they were denying otherwise qualified applicants routinely and with deliberate intent solely on the race or place of residence of those people. Yes, they also loaned money to people who should not have gotten those loans. But the CRA is not 100% those people, or even 50%, overall. The "forcing" was in denying racists their control over the loans.