Democrats Are To Blame For Wrecking The Economy

Democrats keep pointing to "failed Bush policies" as the cause of this economic crisis, but they never say which policies specifically.  Why is this?  It's simply because they know that it's not true.  It's the Big Lie of our time, and they and their allies in the media will keep repeating it until the average citizen accepts it as fact. 

The truth of the matter is that the current recession was caused by the collapse of the housing market.  We all know this to be true, so why did the market collapse?  Were the homes all built so poorly they are falling apart now?  Why else would a home depreciate so much such a short time?  The truth is that there was an extraordinary increase in home values in the years prior to the collapse.  This is called a bubble, and all bubbles eventually burst.

Here's a chart showing the average US home value adjusted for inflation over the last century:

It's clear to anyone looking at the numbers that the housing boom we just went through was unprecedented, and logically one would expect the subsequent fallout to be unprecedented as well.  Hold on tight, this is gonna be a wild ride!

So the housing bubble led us to where we are now, but what led us to a housing bubble?  Was it mass hysteria?  Was it just HGTV shows telling us to "Flip That House"?  Was it unscrupulous bankers and realtors hitting us up on street corners and talking us into risky purchases?  Was it home builders raising prices through the roof?  No, the housing bubble was created by our own greed and desire to live above our means.  However, it was in large part enabled by the policies of Democratic politicians and their pursuit of "affordable housing". 

In 1977 President Jimmy Carter signed the Community Reinvestment Act which pressured banks to grant loans to borrowers who would normally not qualify.  The hope was that home ownership would reduce crime rates in the inner cities and slow or reverse urban decay.  Like everything else Carter tried to do, it failed miserably.

In 1993 the Clinton administration rewrote the rules governing Fannie Mae and Freddie Mac and hoeplessly politicized the agencies.  The GSE's became clients of the Democratic party and began handing out campaign contributions and high paying jobs to politically connected Democrats like never before.

In 1995 President Clinton signed a law greatly expanding the 1977 CRA and forcing affirmative action policies on the banking industry.  Banks now had to meet quotas of minority loans in order to get the favorable ratings they need for government approvals on mergers and acquisitions. 

This video show's Clinton's Secretary of Housing And Urban Development Andrew Cuomo (brother of ABC News Chris Cuomo, but there's NO WAY the media is biased towards Democrats!) proudly explaining how the administration forced a bank to give sub-prime loans as "affirmative action":  

Notice how this ties into the current crisis, ACORN and Barack Obama using charges of racism to intimidate banks into giving out money, and Obama even admitting that the "original idea" was good and by extension that the current problems are therefore tied to this idea.  That idea is affirmative action in the banking industry.  This is not to say that minorities are the cause of the problem, but when you loosen the rules for one group you loosen them for all.

In 1999 the Clinton administration pressured Fannie Mae to buy even more sub-prime loans, which in turn enabled / encouraged banks to loan even more. 

In 1999, under pressure from the Clinton administration, Fannie Mae, the nation's largest home mortgage underwriter, relaxed credit requirements on the loans it would purchase from other banks and lenders, hoping that easing these restrictionswould result in increased loan availability for minority and low-income buyers. Putting pressure on the GSE's (Government Sponsored Enterprise) Fannie Mae and Freddie Mac, the Clinton administration looked to increase their sub-prime portfolios, including the Department of Housing and Urban Development expressing its interest in the GSE's maintaining a 50% portion of their portfolios in loans to low and moderate-income borrowers.

Is this the Bush and Republicans "gutting regulations" that so many Democrats talk about? 

Here's a video that explains how it got out of control at the end of the boom:

Here's a CSPAN video of Democrats blocking Republican efforts to head off the catastrophe in 2004:

Notice how the Democrat's attack the messenger while not addressing the message.  Notice how most of the Fannie Mae officers are ex-Clitonites.  Notice how Bill Clinton himself admits that Democrats are culpable on the issue of blocking reform.  Notice how most of the Democrats are black and how the black community has a strong interest in "affordable housing".  Do you think Bush would have been praised by the media if he'd have pushed harder on this issue, or would they have echoed Democratic politicians calling him a racist who is against "affordable housing"? 

Here's the full time line of President Bush's efforts to save us from this mess:

2001

April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

2002

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

2003

January: Freddie Mac announces it has to restate financial results for the previous three years.

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO's review found earnings manipulations.

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

October: Fannie Mae discloses $1.2 billion accounting error.

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

2004

February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)

February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

2005

April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

2007

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, The White House, 8/9/07)

September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.

September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.

December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon." (President George W. Bush, Discusses Housing, The White House, 12/6/07)

2008

January: Bank of America announces it will buy Countrywide.

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

February: Assistant Secretary David Nason reiterates the urgency of reforms, says "A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully." (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

March: President Bush calls on Congress to take action and "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages." (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

April: President Bush urges Congress to pass the much needed legislation and "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes." (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

"Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans." (President George W. Bush, Radio Address, 5/3/08)

"[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator." (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)

"Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans." (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying "we need to pass legislation to reform Fannie Mae and Freddie Mac." (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

July: Congress heeds the President's call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

The bottom line?

BUSH TRIED, DEMOCRATS LIED, THE ECONOMY DIED.

Comments

[David]

The Dhimmicraps get to have it all their way, because Repugnican'ts have been playing "Dhimmicrap Lite" for so long.

Dhimmicrap Plan: Cause problem; Blame it on The Evil Repugnican'ts (at least partly true with Repugnican't cooperation with Dhimmicraps' policies in Congress); claim the need to "Do something" (that will worsen the problem) NOW; Repugnican'ts either roll over or wait to fight the Dhimmicrappic plan until they have no way to do so (lack the needed votes in Congress). Dhimmicraps make things worse. Blame it on Repugnican'ts, etc.

[Dave A.]

Do you recognize this voice? It's from a speech given in October 2002 on making mortgages more available.

I don't see it in your 'time line'. Maybe you should squeeze it in.

[Dave A.]

Sorry. I guess I don't know how to link.

Please listen to, and enjoy the following;

http://www.thomhartmann.com/BushOctober2002.mp3

[Woody]

A Republican, in fear of Diane Sawyer labeling him a racist, meekly parrots Democrat talking points. Sad? Of course, but one weak speech by GW does not obfuscate decades of Democratic malfeasance.