"Obama flayed Bush over the Iraq war, accused him of taking his eye off the ballSo for Bush to have ruined the US economy, he would have had to cause the housing bubble. How did this happen? How did we get here? Let's start with Fannie Mae and Freddie Mac, two democrat inventions (FDR the former, LBJ the latter) known as GSEs (government sponsored enterprises). In a nutshell, a GSE is "capitalist profits, socialist losses; " that is, when profits are made, the executives make huge bonuses. When bad, the taxpayer is on the hook for the losses (and the executives still make huge bonuses!). When Fannie and Freddie went down, the entire housing market went down with it. These two inventions got absolutely ginormous in the last decade, mostly on subprime loans. But let's back up just a bit.
in Afghanistan and accused him of favoring the rich and ruining the US economy." (emphasis mine)
Before Freddie and Fannie became ridiculously large, there was the Community Reinvestment Act (CRA) of 1977 (Jimmy Carter). It was designed to make sure low-income residents of downtrodden neighborhoods received bank loans. Now the CRA by itself is not to blame for the current meltdown (although it was the beginning of government encouraging 'risky loans'). It had no teeth. It was a bunch of arm-twisting of financial institutions. And back in 1977 and so forth, there were no subprime loans advertised in papers (my parents bought a house then, and it was definitely not subprime). So how did the subprime loan business get so big?
Fast forward to 1995. Bill Clinton gave the CRA teeth (basically made affirmative action a banking requirement). The Glass-Stengal Act of the 1930s, designed to keep banks out of the speculation business following the bank failures during the Great Depression, was repealed. Banks no longer mitigated risky loans with savings deposits (so more risk, and less to back it up - read here). ACORN (yes, THAT ACORN) then launched campaign after campaign of intimidation coupled with protest to force banks to lower credit standards, which they subsequently did (a little). At the same time, Fannie and Freddie lowered credit standards (A LOT. They were pushed to do so by democrats in Congress at the urging of ACORN. yes, THAT ACORN again). Fannie and Freddie began to buy subprime mortgages on the secondary mortgage market while holding just 3% (or less) capital to back up the loans. This encouraged banks to offer more subprime loans, which they did. These loans were subsequently bought up by Freddie and Fannie. More were offered (greed begets greed). You can see where this goes. By 2006, subprime loans made up a full 30% of total loans (they were 2% back in 2002). By 2007, Fannie and Freddie guaranteed half the U.S. mortgage market (12+ Trillion (!) dollars). During this time, Fannie and Freddie were also cooking their books. Once caught, the entire deck of cards came tumbling down (see a good roundup here). These dots are not hard to connect (Ace Ventura would lay out the exact same case and say this).
And the Bush administration's role in this? The Bush administration warned of the danger in letting Fannie and Freddie get too big as early as 2002. See the report here. The administration called for more regulation (aren't dems blaming Bush for not enough, even though they fought all regulation on Freddie and Fannie?). They were blocked at every single turn by Barney Frank, Chuck Schumer, Chris Dodd, and the like. Hey, don't trust me on this. Hear it right from the mouths of the democrats responsible for oversight:
For the record, Obama's chief-of-staff-in-waiting, Rahm Emanuel, was a board member at Freddie Mac (appointed by Bill Clinton) during the book-cooking phase. And Fannie Mae's CEO during this time? Franklin Reines, Obama advisor. Freddie Mac's CEO? Jim Johnson, Obama advisor. By the way, Fannie and Freddie gave political contributions to politicians. #1 recipient? Chris Dodd. #2 recipient? Barack Obama.
The fact that the democrats, and their allies in the mainstream media, have somehow hung this debacle around the neck of George W. Bush is a masterpiece of politics and deception. I somehow hold out hope that, someday, history will tell the true story of the out-of-control government influence responsible for this mess. Sure there's enough blame to go around, but the bulk has to reside at the feet of the democrats for introducing social engineering into the banking system.
