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That's the standard line about our current recession. The story goes "Bush's failed policies and deregulation of the last 8 years caused the financial meltdown."
Sounds good, doesn't it ? Obama repeated it endlessly on the campaign trail.
There's only one problem with the story.
It didn't happen.
I've written previously about how the government pushed the banks into making risky loans for years. Decades even. The number one cause of the financial meltdown is the politically driven agendas of our government. It wasn't Bush's deregulation. The deregulation all happened before Bush even took office. Bush did have the goal of increasing home ownership, just like every other administration, and just like most members of Congress, but to lay the blame all at his feet requires an enormous rewrite of history. Let's insert a few facts into the narrative.
Walter Williams wrote an excellent piece called Congress' Financial Mess, which debunks some of the myths. Let's start with Bush's alleged deregulation:
Professor David Henderson, research fellow at Stanford's Hoover Institution, writes about regulation in "Are We Ailing From Too Much Deregulation?" in Cato Policy Report (November/December 2008). The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years. Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase. In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion.
So, the number of regulations, spending for regulatory agencies, and personnel for regulatory functions all increased dramatically during the Bush administration. I wonder why we've never heard that from our media or from Congress ??? What could the reason possibly be ???
Because it interferes with their phony partisan narrative, that's why. The truth might interfere with the re-elections plans of certain Congressional members, and we can't have that. Oh, no.
Mr. Williams goes on to shed some light on why the banks were forced to make those risky loans:
A New York Times article, "Fannie Mae Eases Credit To Aid Mortgage Lending" (9/30/99), reported, "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people …" The pressure was the 1977 Community Reinvestment Act that was beefed up during the Clinton Administration. It required banks to make high-risk loans they would not have otherwise made. Failure to comply meant fines and difficulty in getting approval for mergers and branch expansion.
Like I said, the housing bubble was totally driven by politics. Bush didn't try to reverse the policies, you can blame him for that, but he didn't create them either. There's a lot of blame to go around.
And when the financial alarm bells began to go off, there were many members of Congress who claimed it was all much ado about nothing:
When questions began to arise about government policy that intimidated lenders into making high-risk loans, we received congressional assurances. At hearings investigating the solvency of Fannie Mae and Freddie Mac, Rep. Barney Frank [D-CT] said, ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' In a speech to the Mortgage Bankers Association, Frank advised, "People tend to pay their mortgages. I don't think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren't there." Protesting against greater controls against lax mortgage lending, Sen. Harry Reid [D-NV]said, "While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process."
Guess what Barney Frank and Harry Reid say now that everything has blown up in their faces ??? They say it was all Bush's fault, of course. What Frank and Reid are engaging in is commonly known as 'lying through their teeth." And they have actually been rewarded for it.
The question to ask is, how could our government (all of it, not just Bush) be so god-awful stupid ? The answer is, because they are only politicians. They aren't experts on much of anything. Their goals are to get elected and acquire power. They do that by pandering to the public, not by formulating intelligent policies. So, now that we're up the creek, financially speaking, guess who we're looking to for solutions to the problem ??? The very same people who caused it. Barney Frank is the head of the House Financial Services Committee. Harry Reid is the Senate Majority Leader.
And they are spending trillions of YOUR dollars. Good luck with that.