Today, President George Bush gave a speech on his domestic policy legacy at the American Enterprise Institute. Responding to a question about President-elect Obama “blaming the crisis on Bush deregulation,” Bush said that he is “looking forward to the true history of this financial crisis being written,” adding that there’s “no question part of the crisis came about because of excesses in lending in the housing market.” Watch it:
Bush is right to say that excesses in lending had a lot to do with the financial meltdown. However, he then blamed the excess on Fannie Mae and Freddie Mac, a favorite conservative red-herring. Fannie and Freddie can not issue subprime mortgages, and as the crisis was building momentum their market share of subprime securities was falling.
In fact, it was Bush who ignored “remarkably prescient warnings” regarding problems in the housing market, while removing regulations that reined in excesses on Wall Street. The Bush administration actually “backed off proposed crackdowns on no-money-down, interest-only mortgages,” even though regulators were ringing alarm bells. Consider:
- In 2004, housing advocates at the Greenlining Institute warned the administration “that deception was increasing and unscrupulous practices were spreading.”
- In 2005, Federal Reserve Board governor Edward Gramlich “warned his colleagues of the decline of lending standards and the dangers that this posed.”
- In 2006, the Government Accountability Office reported that “from 2003 to 2005, non-traditional mortgages rose from less than 10 percent of all mortgages to about 30 percent.”
Despite these myriad warnings, nothing was done. Plus, as Joseph Stiglitz explained, Bush was “applying the leeches” to an already unstable financial system by slashing taxes for the wealthy and launching a misguided war in Iraq that has cost billions:
The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil — money that otherwise would have been spent on American goods.
Bush is going to pay a large role in the “true history of the financial crisis.” But maybe seeing his name in print over and over is what he’s “looking forward to.”