New York Times Blames Housing and Financial Crisis on Bush
UPDATE AT END OF POST: White House issues statement concerning "Irresponsible Reporting by New York Times."
It's official: the housing and financial crisis gripping the nation is President George W. Bush's fault.
So said the New York Times Sunday in a 4900-word, front page hit piece entitled "The Reckoning - Bush's Philosophy Stoked Mortgage Bonfire."
And what was this heinous, catastrophic philosophy that caused all our nation's problems? "Americans do best when they own their own home."
Oh the humanity.
Sadly, much as the Times and its liberal colleagues conveniently forgot and/or ignored all American history prior to March 2003 in order to blame the nation's problems on Bush and the invasion of Iraq, the authors of this disgrace omitted and/or skirted over virtually all the relevant pieces of legislation and issues that led to our current financial crisis -- as well as articles on the subject published by their very paper!!! -- instead focusing readers' attention on the following (emphasis added throughout, photo courtesy NYT):
From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.
He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.
HIS housing policies and hands-off approach to regulation encouraged lax lending standards?
Clearly, the authors are suffering from the worst form of Bush Derangement Syndrome as such housing policies encouraging lax lending standards have existed in this nation since Jimmy Carter signed the Community Reinvestment Act in 1977. This required financial institutions to make loans to lower-income individuals in the communities they served. Non-compliance with this Act would prevent a bank or savings and loan from being able to expand within the states it was currently in and beyond.
For some reason an almost 5000-word article about the current housing and financial crisis completely ignored this ground-breaking Act.
Maybe even worse, although the authors briefly mentioned Bush's predecessor -- "Advocating homeownership is hardly novel; the Clinton administration did it, too" -- they completely ignored a number of major events that transpired in 1999 and 2000 that are very much at the heart of this housing and financial crisis.
As the Times wrote on September 30, 1999 (emphasis added):
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
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 and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
The Times was even prescient with the following warning:
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Amazing. More than nine years ago, the Times practically predicted that moves by Fannie Mae, which were encouraged by the Clinton administration, could result in that entity being bailed out. Yet, nine years later when this prognostication came true the Times chose to completely ignore its own prescient words.
I guess they didn't feel they had enough room in this 5000-word piece.
Nor did they have any space to apprise readers of the Financial Services Modernization Act of 1999. This legislation, passed with overwhelming bipartisan support in both chambers of Congress and signed into law by Clinton in November 1999, removed the last vestiges of the Depression era Glass-Steagall Act thereby allowing banks, brokerage firms, and insurance companies to offer exactly the same services.
This deregulation is the key to our current financial crisis, but was totally ignored in this Times piece.
So, too, was the Commodities Futures Modernization Act of 2000 which, amongst other things, deregulated lending derivatives thereby making it possible for banks, brokerage firms, and insurance companies to issue and trade credit default swaps without any government oversight.
As NewsBusters readers are highly aware, it is in fact credit default swaps which are at the heart of our current crisis -- the so-called "toxic paper" you've heard so much about during Congressional hearings the past few months.
Yet, the Times chose to not address credit default swaps in this almost 5000-word piece. And, although the word "derivatives" was mentioned twice, the authors opted not to mention the Act which deregulated them OR the president -- Clinton! -- who signed that legislation into law.
It is a categorical and indisputable fact that the deregulation at the heart of our current crisis was all signed into law before George W. Bush became president. Yet, the Times disingenuously chose not to share that with its readers. (Please see Update II at end of post addressing another huge event in 2000 the Times chose not to share with its readers.)
Instead, it continued with this disgraceful charade:
Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal.
Not exactly. As the Times reported on September 11, 2003 (emphasis added):
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. [...]
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.
Why did the Times choose to gloss over this five years later? In an almost 5000-word article, wouldn't it have been nice for the authors to be more specific about what the Bush administration proposed in 2003?
But there's more:
In the 2004 election cycle, mortgage bankers and brokers poured nearly $847,000 into Mr. Bush’s re-election campaign, more than triple their contributions in 2000, according to the nonpartisan Center for Responsive Politics.
If the Times was going to address political contributions, shouldn't it have also informed readers about donations by Fannie Mae and Freddie Mac to active members of Congress since 1989? Take a look at the top three recipients:
Dodd, Christopher $165,400
Obama, Barack $126,349
Kerry, John $111,000
As Dodd has been the Chairman of the Senate Banking Committee since January 2007, and Obama is the president-elect, aren't these campaign contributions from these now bailed out GSEs just as important as what Bush received from mortgage bankers and brokers in 2004?
Apparently not, as the Times completely ignored this.
But there's more:
By the spring of 2005 a deal with Congress [to create stricter oversight of Fannie Mae and Freddie Mac] seemed within reach, Mr. Snow, the former Treasury secretary, said in an interview.
Michael G. Oxley, an Ohio Republican and then-chairman of the House Financial Services Committee, had produced what Mr. Snow viewed as “a pretty darned good bill,” a watered-down version of what the president sought. But at the urging of Mr. Card and the White House economics team, the president decided to hold out for a tougher bill in the Senate.
Mr. Card said he feared that Mr. Snow was “more interested in the deal than the result.” When the bill passed the House, the president issued a statement opposing it, effectively killing any chance of compromise.
Unbelievable nonsense. If you're going to devote 5000-words to this issue, why not share with your readers some details concerning the Senate bill the White House supported, and why it never was enacted?
As the Times reported on July 23, 2005 (emphasis added):
The chairman of the Senate Banking Committee, Richard C. Shelby, offered a bill on Friday intended to strengthen oversight of Fannie Mae and Freddie Mac that places some restrictions on the investment portfolios of the companies.
The legislation from Mr. Shelby, an Alabama Republican, would create a new regulator for the government-sponsored enterprises with the authority to set risk-based capital standards and minimum capital levels, approve new business activities and unwind a company if it fails.
In addition, Mr. Shelby's bill goes further than legislation in the House by directing a regulator to establish criteria that restricts the types of assets in portfolios held by Fannie Mae and Freddie Mac. [...]
But even as Mr. Shelby moves forward, with a vote expected in his committee next week, Washington lobbyists and Wall Street analysts said chances were slim that legislation would pass this year because time was running out on the Congressional session.
Earlier this year, a House committee passed a bill to stiffen regulation of the companies, but the White House has called that legislation too weak and Mr. Greenspan said it would be better to have no legislation at all than to push forward with the House bill.
Hmmm. So the Times reported in July 2005 that the House bill was weak, so much so that then-Federal Reserve Chairman Greenspan "said it would be better to have no legislation at all than to push forward with" it. Yet, three years later, these authors didn't feel it was necessary to share this with their readers, instead blaming the death of this bill on Bush.
Alas, the Times deceitful misdirection gets even worse as illustrated by its July 29, 2005 report:
The Senate Banking Committee approved a bill yesterday that would tighten oversight of the mortgage finance companies Fannie Mae and Freddie Mac and shrink their assets.
The measure, sponsored by the committee's chairman, Richard C. Shelby, Republican of Alabama, was approved in an 11-9 vote along party lines. The measure would compel the companies to sell portfolio assets unrelated to their mortgage bond business.
What this means is that all nine Democrats on the committee voted against the bill basically making it impossible for Republicans to defeat a filibuster when it came to the Senate floor.
As such, not only did the Times refuse to inform readers as to why the Bush administration and Greenspan preferred the Senate bill, but the authors also chose to withhold the fact that Senate Democrats prevented its passage.
When you add it all up, this Times piece is a disgraceful work of fiction designed to convince readers that the current housing and financial crisis is all George W. Bush's fault, and tries to accomplish this goal by intentionally omitting key facts that this paper has itself reported in the past while also misrepresenting the truth so as to shelter Democrats from any blame whatsoever.
To put it bluntly, this article is a journalistic fraud that if perpetrated by employees in virtually any other industry in our nation would result in immediate termination, revocation of licenses and accreditations, or worse.
I would suggest that Executive Editor Bill Keller be ashamed of this piece of detritus, but such would be a waste of bandwidth as he clearly abdicated journalistic integrity many years ago.
Unfortunately, the moral of this story is even more depressing for in the coming months as Obama and Company take over the White House, sycophants like the Times will continue to spread lies and revise history depicting every unfortunate event befalling our nation as George W. Bush's fault.
It really is a sad time to be an American.
Most people can accept that a news story recounting recent events will be reliant on '20-20 hindsight'. Today's front-page New York Times story relies on hindsight with blinders on and one eye closed.
The Times' 'reporting' in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn't fit their point of view. To prove the point, when they filed their story, NYT reporters were completely unfamiliar with the President's prime time address to the nation where he laid out in detail all of the causes of the housing and financial crises. For example, the President highlighted a factor that economists agree on: that the most significant factor leading to the housing crisis was cheap money flowing into the U.S. from the rest of the world, so that there was no natural restraint on flush lenders to push loans on Americans in risky ways. This flow of funds into the U.S. was unprecedented. And because it was unprecedented, the conditions it created presented unprecedented questions for policymakers.
In his address the President also explained in detail the failure of financial institutions to perform normal and necessary due diligence in creating, buying and selling new financial products -- a problem that almost no one saw as it was happening.
That the NYT ignored such an important economic speech to the American people and the complex causes of the crises is gross negligence.
The Times story frequently repeats a charge by the Administration's critics: a 'laissez faire' attitude toward regulation. We make no apology for understanding the concept of regulatory balance. That is, regulation should be stringent enough to protect the greater public good and safety but not overly strong so that it unnecessarily inhibits innovation, creativity and productivity gains that are the sole source of increasing Americans' standards of living. But while repeating this charge, the reporters gave glancing attention to the fact that it was this Administration that pushed for strengthened regulation and oversight, greater transparency, and housing reform.
The story also gives kid glove treatment to Congress. While the Administration was pushing for more transparent lending rules and strengthening oversight and supervision of Fannie and Freddie, Congress for years blocked attempts at stronger regulation and blocked reform of the Federal Housing Administration. Democratic leaders brazenly encouraged Fannie and Freddie to loosen lending standards and instead encouraged the housing GSEs to play a larger and larger role in the housing market -- even while explicitly acknowledging the rising risks. And while the story notes the political contributions of some banks to Republicans, it neglects that political contributions from Fannie Mae and Freddie Mac overwhelmingly supported Democratic officials -- in particular the chairmen of the banking committees. In fact, even in the midst of what by then was a housing crisis, it took Congress nearly a full year to pass specific legislation called for by the President in the summer of 2007, especially legislation to reform oversight of Fannie Mae and Freddie Mac.
There are many more reporting failures in this story -- failure to consider the impact of monetary policy; ignoring the regional nature of housing markets; and ignoring the Bush Administration's historic proposal to overhaul the nation's regulatory system, for example. But then a review of these issues would wave complicated the reporters' myopic point of view that only Bush Administration policies could possibly be responsible for the housing and finance crises.
*****Update II: Here's another huge event in 2000 the Times neglected to inform its readers of (h/t NBer Gary Hall):
WASHINGTON - The U.S. Department of Housing and Urban Development today announced new federal regulations that require the nation's two largest housing finance companies to buy $2.4 trillion in mortgages during the next 10 years to provide affordable housing for about 28.1 million low- and moderate-income families.
The historic federal regulations by HUD raises the required percentage of mortgage loans for low- and moderate-income families that finance companies Fannie Mae and Freddie Mac must buy annually from the current 42 percent of their total purchases to a new high of 50 percent - a 19 percent increase.
"Even with a record high homeownership rate of 67.7 percent, there is still much more to be done. These new regulations will greatly enhance access to affordable housing for minorities, urban residents, new immigrants and others left behind, giving millions of families the opportunity to buy homes or to move into apartments with rents that they can afford," HUD Secretary Andrew Cuomo said. "We acknowledge and appreciate that Fannie Mae and Freddie Mac have accepted this challenge."
The mortgage purchase requirement -- also known as the affordable housing goals -- for Fannie Mae and Freddie Mac was last set by HUD in 1995, under a requirement mandated by Congress. The goals came up for renewal last year, and HUD had the choice of leaving them unchanged, or lowering or raising them.
In addition to helping low- and moderate-income families, the new federal regulations will also increase the affordable housing goals for loans made to underserved areas and will raise the goal for mortgages to benefit families with very low incomes. A special affordable housing goal for families with very low incomes and low incomes (those with less than 60 percent and 80 percent of area median) jumps from the current 14 percent to 20 percent (a 43 percent increase). In addition, a geographically targeted goal for underserved areas (central cities, rural areas, and underserved communities based on income and minority concentration) increases from 24 percent to 31 percent (a 29 percent increase).
Moreover, the new regulations also disallow GSEs (Government Sponsored Enterprises i.e. Fannie Mae and Freddie Mac) from receiving affordable housing goals credit for the purchase of mortgage loans with predatory features. These limitations are consistent with the recommendations contained in the HUD/Treasury report "Curbing Predatory Home Mortgage Lending," issued in June 2000.
Under the higher goals, Fannie Mae and Freddie Mac are anticipated to acquire an additional $488.3 billion in mortgages that will be used to provide affordable housing for 7 million more low- and moderate-income families, many of them minorities, during the next 10 years. Those new mortgages and families are over and above the $1.9 trillion in mortgages for 21.1 million families that would have been generated if the current goals had been retained.
HUD published a proposed rule on these new goals March 9, 2000, with the promise that it would be fully implemented beginning in year 2001. The Federal Regulations published today will take effect January 1, 2001.
Do you think these new regulations, mandated before George W. Bush was even elected president, had anything to do with the current housing and financial crisis? Shouldn't the Times have included this information in its 5000-word article Sunday if the goal was to inform readers of the truth concerning this issue?
*****Update III: Thomas Lifson deliciously asks: "Is it just me, or is the NYT getting worse and worse by the day? Will the company go bankrupt intellectually or financially first?"