What responsibility does the Bush administration bear for the current financial crisis?

March 25, 2009 7:27 AM

What responsibility does the Bush administration bear for the current financial crisis?

When I visit my father, we usually argue about politics.

He's a big Fox News fan, and I think it's drivel. He tends to parrot what he sees there, and I often find myself explaining how things really work to him.

Since Obama was elected, these arguments have been far less frequent - until the last two weeks when suddenly the Republican spin machine began to pound Obama's budget plans in light of our financial crisis.

I keep telling him, "Bush was president for the last eight years."

He keeps saying, "This is not Bush's fault."

So, hivemind, what sort of responsibility does the Bush administration really bear in all of this mess?

Links to source material are welcome.

posted by Lownotes to law & government (28 answers total)

Actually, you can both find common ground. It's the Clinton administration's fault, specifically its passage of the Gramm-Leach-Bliley Act of 1999 which allowed the integration of investment banks and savings banks and led directly to the speculation in derivatives and other financial toys over the past decade. You can still win the argument by pointing out that Phil Gramm would have "run" the economy in a John McCain administration. shuddder.
posted by Saucy Intruder at 7:31 AM on March 25, 2009 [3 favorites]

When I visit my father, we usually argue about politics.

Why is that? Do you bring it up? If so, stop it. If he brings it up, switch subjects, unless you find this fun, then carry on.

It's impossible to win at these arguments, especially among family (been there, done that).
posted by Brandon Blatcher at 7:43 AM on March 25, 2009 [4 favorites]

Remember this is not about who's wrong or right. You'll never change your father's views. You could show him a video of Bush and Cheney discussing plans to destroy the economy whilst waterboarding a baby and his views won't change.

Most people's belief structures around religion and politics have been built up over many years and are much too strong to be whisked away with "facts" or "truths." Anything that you provide will be dismissed easily as an attack by a liberal media, making statistics lie, or 100 other reasons.

My advice? Talk about the weather, March madness, or anything else. Enjoy spending time with your Dad. You probably agree on a lot more than you disagree on.

(on preview, what BrandonBlatcher said so succinctly.)
posted by mattybonez at 7:46 AM on March 25, 2009 [2 favorites]

Although Clinton did sign the bill into law, it was passed by such a large majority that any veto would have been overridden. If you believe the Gramm-Leach-Bliley Act was a prime cause of the current financial situation, then you have to blame almost all the members of congress at the time.

For the Bush administration's part, they seemed to be very willing to relax regulations on banks, allowing them to regulate themselves. The head of the SEC later acknowledged that this didn't work.

If your father is dogmatic about political parties, pretty much no argument will do any good.
posted by demiurge at 7:52 AM on March 25, 2009 [3 favorites]

Just adding on. Read about the repeal of the Glass-Steagall Act.
posted by Fairchild at 7:56 AM on March 25, 2009 [4 favorites]

Id say very little. There's no shortage of things to blame on Bush, so I dont see why you would need to focus on this very difficult to defend argument. Ive seen a lot of blame thrown around and a general "Well, democrats like to regulate and republicans like to deregulate so a democrat would have avoided this." I think this goes way beyond partisan politics. At the end of the day those securities were worthless and the ratings on them were very high. Bush, Clinton, or Gore would probably have done nothing.

Also, there's an argument to be made about "the shame of renting." Something the Clinton administration peddled to encourage home ownership, sometimes to people least able to afford it. Not to mention the aforementioned Gramm-Leach-Bliley act.

Part of me thinks that the democrats have been quiet on casting blame because they know theyre as guilty as anyone else. If they tried to pin this purely on Bush then there might be some embarassing blowback.
posted by damn dirty ape at 8:01 AM on March 25, 2009 [2 favorites]

Who, exactly, does your father think is responsible? Obama? He hasn't been in office 70 days yet. Clinton? Somewhat, but Bush had 8 years to fix any of these "mistakes". Instead, he took a $128b surplus and drove it into a nearly half-trillion dollar deficit, and did nothing to impose regulations that would have eased, if not prevented, this crisis. Mind you, for much of Bush's presidency, Congress was in the palm of his hand- they would have passed any bill he asked for.

70 days.
Eight years, nearly 3 of which were spent on vacation.
posted by mkultra at 8:02 AM on March 25, 2009 [11 favorites]

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print

This is the best article I've found on the financial crisis. Taibbi does a great job of explaining it.

From everything I've read, it sounds like it was the fault of Clinton and Bush, as well as Phil Graham and every other member of Congress that voted for the Glass-Steagall Act.
posted by roxie5 at 8:20 AM on March 25, 2009 [1 favorite]

(I believe roxie5 meant to say "every other member of Congress that voted to *repeal* the Glass-Steagall Act".)
posted by notsnot at 8:21 AM on March 25, 2009

It's the Clinton administration's fault, specifically its passage of the Gramm-Leach-Bliley Act of 1999 which allowed the integration of investment banks and savings banks and led directly to the speculation in derivatives and other financial toys over the past decade.

Guns don't kill people, people kill people.

Bush put some incredibly incompetent people into office charged with oversight of the financial system, like his first Treasury secretary, the retired Alcoa guy. How long did he last? His second one was better but was fired for telling what approximated the truth about the future cost of the war.

I can't be arsed to find it now, but there was a SEC meeting ca. 2003 where they relaxed the leverage rules that allowed the banks to lever up 30:1 or more. This brought in more profits during the boom times, which helped drive the S&P up to 1400, making all our 401ks look a lot better, but was the critical poison that both killed the investment banks.

There's an above point that a Democratic administration might have done a similarly lame job of policing the system. Given the dynamics of the tech crash and ensuing recession, and the housing-led recovery, I tend to agree that even eg. a Gore admin with a Dem Congress would have made the same mistakes since this financial alchemy /seemed/ to work, until the wheels came off in March 2007.

But don't argue with your father about politics.
posted by mrt at 8:22 AM on March 25, 2009

I did... thanks notsnot
posted by roxie5 at 8:24 AM on March 25, 2009

There was a great Frontline on PBS last night on the national debt and what lead to it. It doesnt go into other parts of the financial crisis, like de-regulation etc, but it really clarified what kinds of descisions Bush made that lead from a surplus to the trillion dollar debt that we have today (and rising...)
posted by minicloud at 10:07 AM on March 25, 2009

Some people think the real source of this is the Community Reinvestment Act -- and that was Carter.
posted by Chocolate Pickle at 10:50 AM on March 25, 2009 [1 favorite]

Fannie Mae and Freddie Mac was an octopus with tendrils around both parties, and was able to bend both Dems and RNC members to its lobbying will.
posted by benzenedream at 11:08 AM on March 25, 2009

Also, don't forget how the FDIC was not allowed to collect insurance premiums from 1996 through 2006 while the republicans controlled congress. It was only after the democrats got the majority that the FDIC was allowed to collect them.

Hurley agreed with Bair's analysis of the FDIC's dilemma. "Typically you would build up a reserve during the halcyon days to protect yourselves during a recession," he said, calling the decision to stop collecting most premiums "a political one" that was pushed by banks and not based on strict accounting principles.

posted by Arthur Dent at 11:46 AM on March 25, 2009 [1 favorite]

Chocolate Pickle, the CRA did no such thing. And it has been debunked in many ways.

From Barry Ritholtz's blog:

Let’s put some context around what the CRA is and isn’t.

In the 1960s and 70s, banks would redline neighborhoods. They would literally put a map on a wall, and with a red magic marker, draw a redline enveloping certain neighborhoods. If you lived within the redlined areas, regardless of your income, credit score, assets, debt servicing ability, if you were in the redlined area you could not qualify for a mortgage.

Although Redlining was made illegal by the Fair Housing Act of 1968, the practice still surreptitiously continued. The Community Reinvestment Act of 1977 was the next attempt to stop redlining. There were two main aspects of the CRA: First, it required banks to apply the same lending criteria in all communities. Credit Score, Loan-to-value, percentage of monthly take home, etc. had to be the same across different areas.

Second, the Community Reinvestment Act required banks to make good faith attempts to loan the money back to its own depositors. If you open up a branch in Harlem, you cannot suck up all the local business and residents’ cash, and then turn around and only lend it out to Tribeca condo buyers. You must make a fair attempt to loan the money locally. Banks have no obligation to open branches in Harlem, but if they did, they are required to at least try to lend the locals back their own money.

I'm just annoyed that a right wing smear is still making the rounds
posted by Arthur Dent at 11:56 AM on March 25, 2009

You could probably leave partisan politics out of it and just chalk it up to it being greedy shortsighted peoples' fault.
posted by ian1977 at 12:08 PM on March 25, 2009

Just adding another vote for "Don't argue about politics with your father." I mean, really... be honest with yourself... what could you possibly gain by arguing about politics with him?

Will you be able to change his mind? Not going to happen.
Will he be able to change your mind? Not going to happen.
In his view, you're wrong.
In your view, he's wrong.

It's a no win situation if you choose to be lured into an argument. The good news is that you can't lose an argument you choose not to have. Believe it or not, it is a choice since it takes two people to argue. If he is the one who tends to start these arguments about politics, you can easily pull the rug out from under a debate by saying "I guess we have different opinions on politics, and there's nothing wrong with that at all." The key is to not imply that you're right or that he's wrong (even if he is). Just say that the two of you don't agree. If he pushes for a debate, just continue to state that the two of you have different opinions, and that that's fine. If he pushes again, just say it again, even if you're repeating yourself word for word.

Best of luck!
posted by 2oh1 at 12:21 PM on March 25, 2009

The question is "Whose fault?" not "Should I argue with my father?"
posted by docgonzo at 1:10 PM on March 25, 2009 [2 favorites]

Clinton? Somewhat, but Bush had 8 years to fix any of these "mistakes".

Yes. Bush should have fixed what Congress broke during the Clinton years.
posted by The World Famous at 1:18 PM on March 25, 2009

On Fresh Air today - Frank Partnoy: Derivative Dangers. You can listen at the site (RealPlayer), or download the podcast (later today, I think). Highly recommended, even if the title of the segment sounds like a cheesy thriller.
posted by lukemeister at 1:45 PM on March 25, 2009

All of it. If we didn't spend trillions of dollars on the "War on Terror" we wouldn't be having these problems. How many billions did we give to Halliburton? How many billions have disappeared into thin air? Anyone blaming Clinton has their head so far up their ass (or Rush Limbaugh's ass) it's not worth talking about. Clinton left us with a massive surplus that GWB and his cronies destroyed. I agree with he above posters, just don't talk politics with your dad. You will never change his mind.
posted by wherever, whatever at 1:52 PM on March 25, 2009

All of it. If we didn't spend trillions of dollars on the "War on Terror" we wouldn't be having these problems.

This is incorrect. Spending on the GWOT has been, generally, a bad thing and excessive, yes. But it is not in any way, shape, or form the cause of the global financial/economic crisis. It has nothing to do with credit/default swaps, naked short selling, toxic bank assets, irrational exuberance, the U.S. housing market, Freddie & Fannie, banking deregulation, securities fraud, AIG, the collapse of banks, or any of the other things that are components of the global economic crisis.
posted by The World Famous at 2:27 PM on March 25, 2009

Frankly, I think you could probably begin the blame with the deregulation / "greed is good" mentality of the Reagan / Bush 1 administration, the Clinton administration, which didn't do a damned thing to slow it down (and even made it worse) and the Bush administration, which allowed emerging problems of all sorts to get worse, in addition to creating brand new nightmares. As a liberal, I'd like blame the Republicans (though it's disproportionately their fault), but that would be dishonest.

Blaming Obama is pretty ridiculous, though.

I wasn't around for Carter (or Reagan or Bush 1), but it's amazing to me how farsighted Carter was in terms of many things, despite being pretty derided from what I've read and heard.
posted by Dee Xtrovert at 2:52 PM on March 25, 2009

The President heads the Executive branch of the government. He doesn't make laws or loans. It's not Bush or Clinton's fault or even Congress. People made stupid decisions. They borrowed too much, they used the money poorly, they lied on loans, banks lent to people they knew wouldn't pay back, and people bought bonds they didn't understand.

Anybody who pulled money out on a HELOC to buy a flat screen tv is responsible. Anybody who bought a house to flip and thinks the world owes them a 100% return is responsible. Anybody who saw their house price triple and spent the money via their credit card instead of actually selling their house and using real money is responsible.

As a country we chose to live large for a few years and the world lent us the money. But the govt is no more responsible for that than are the parents of a 20 something year old with a lot of credit card debt.

There's no question that a lot of innocent people have been hurt and people who did nothing wrong are going to pay the price. But this is so far beyond the cause of one man or one govt...it was a societal failing.
posted by limagringo at 5:54 PM on March 25, 2009 [3 favorites]

The Bush administration was leading the country for 8 years leading into this mess, so they do hold some but not all of the responsibility for it. In the same way that the late nineties (under Clinton) allowed a tech/telecommunications bubble to form through lack of regulation that led to the eventual failure of several huge firms that hurt the economy (Worldcom, Global Crossing, etc...). That leads to the Bush era where a lack of oversight and regulation allowed a housing bubble to arise that helped cause (but in no means is completely responsible for) this current mess. Better oversight and regulation could have helped avoid this, but another major player in this was the recklessness of the average home owning US citizen. Buying homes completely out of their financial ability to pay (many times with huge ballooning interest rates), refinancing their homes and spending like money is water, and possibly most condemning was the basic mindset that you could become a millionaire in a few years by buying and selling homes. Now I am no fan of Bush in particular, but to blame him completely is reckless and uninformed. Economics on the Macro level is very complex and the brightest minds rarely agree completely, but Bush certainly had something to do with it.
posted by gibbsjd77 at 12:58 PM on March 26, 2009

It's Regan's fault.

I kid. Blaming any single administration or person is much too simple. It's like blaming Bush (or Clinton) for 9/11. There's a lot of moving parts involved in these big things and the world economy is outrageously big and outrageously complex.
posted by chairface at 4:04 PM on March 27, 2009

There's a very prescient New York Times article from 1999 here that spreads the blame around nicely:

"The measure, considered by many the most important banking legislation in 66 years, was approved in the Senate by a vote of 90 to 8 and in the House tonight by 362 to 57...

...In the House, 155 Democrats and 207 Republicans voted for the measure, while 51 Democrats, 5 Republicans and 1 independent opposed it. Fifteen members did not vote..."

Seems to me as if banking and insurance lobbyists had their hands firmly up the backsides of both parties. The main point though, is that the Bush administration presided over the degeneracy of the banking and insurance systems for 8 out of the 9 years that the regulations have been in place.
posted by bonobothegreat at 8:04 AM on March 30, 2009