Editorial: Bush Had Nothing To Do With Financial Crisis

As the financial crisis hit last September, NewsBusters regularly informed readers of the truth behind the matter, and that media assertions the Bush administration was to blame were politically motivated falsehoods intentionally designed to get Barack Obama elected president.

On Saturday, the financial publication Barron's offered readers an editorial by Hoover Institution visiting fellow Scott S. Powell which presented facts that were routinely withheld from the public during the campaign assuring the Democrat candidate victory in November.

More importantly, Powell offered some compelling insights into the dangers of partisanship which sadly is negatively impacting today's stimulus package discussion.

But before we get there, this was Powell's case as to who was really to blame for this crisis (h/t Hot Air):

CONTRARY TO A VIEW POPULARIZED DURING THE 2008 presidential election season, the current economic crisis was not the result of deregulation.

The Bush administration made many mistakes, but deregulation was not one of them.

Not only was there no major deregulation passed during the past eight years, but the Bush administration and a Republican Congress approved the most sweeping financial-market regulation in decades.

The bipartisan Sarbanes-Oxley Act was enacted in 2002 to prevent corporate fraud and restore investor confidence after the collapse of Enron and WorldCom. It failed to prevent the accounting fraud and influence-peddling scandals at Fannie Mae and Freddie Mac. And even after those scandals were widely understood, regulators sent Fannie and Freddie back into the market to continue buying subprime loans, lending and borrowing with implied taxpayer backing.

Across the government, the Bush administration supported new regulations that added almost 1,000 pages a year to the Federal Register, nearly a record. If this is insufficient regulation, it's hard to imagine a scope that would be effective.

Powell of course was spot on. Sarbanes-Oxley was indeed a comprehensive and encompassing piece of legislation specifically designed to prevent a repeat of the tech bubble and Enron. Yet, as the financial crisis raged last fall, media members who wanted to blame the problem on Bush and deregulation conveniently forgot this sweeping bill.

But there's more:

Our present crisis began in the 1970s, during the Carter administration, with passage of the Community Reinvestment Act to stem bank redlining and liberalize lending in order to extend home ownership in lower-income communities. Then in the 1990s, the Department of Housing and Urban Development took a fateful step by getting the GSEs to accept subprime mortgages. With Fannie and Freddie easing credit requirements on loans they would purchase from lenders, banks could greatly increase lending to borrowers unqualified for conventional loans. In the name of extending affordable housing, this broadened the acceptability of risky loans throughout the financial system. 

The risk lurking in the GSE portfolios was acknowledged in the Bush administration's first fiscal-year budget, released in April 2001. It stated that Fannie and Freddie were "a potential problem" because "financial trouble of a large GSE could cause strong repercussions in the financial markets, affecting federally insured entities and economic activity." Fed Chairman Alan Greenspan issued repeated warnings that the GSEs "placed the total financial system of the future at substantial risk." Such warnings went unheeded even after accounting scandals rocked Fannie and Freddie.

Yep. The Bush administration began warning of problems with Fannie and Freddie just three months into its first term, and continued doing so for years. But you wouldn't know that from how the press reported things last fall, would you? 

However, what's done is done. The press wanted Obama to be president, and by dishonestly blaming Bush for the financial crisis, so-called journalists were able to paint John McCain as also being at fault thereby making it impossible for him to win.

Yet, Powell left us with a warning concerning this matter that is quite important given economic stimulus plans currently being discussed:

But the lesson should be clear that socializing failed businesses -- whether in housing, health care or in Detroit -- is not a long-term solution. Expanding government's intrusion into the private sector doesn't come without great risk. The renewing and self-correcting nature of the private sector is largely lost in the public sector, where accountability is impaired by obfuscation of responsibility, and where special interests benefit even when the public good is ill-served.

George Washington also warned against excessive partisanship, which distracts public councils and enfeebles public administration. Rather than blaming the party in power or the party formerly in power, the nation should stop living in denial of the mistakes of both parties.

Spreading failure across the entire economy risks turning a recession into a depression. Regulatory reform now must foster responsible behavior and financial accountability. Far better for our citizenry and businesses to have a strength and resourcefulness that comes from creativity, honesty and self-reliance than to have a growing dependence on a profligate government.

Powell touched on a lot of issues here that should be at the front of the current stimulus debate but sadly aren't.

In particular, the partisanship in the nation today prevents an honest assessment of the past thereby dooming us to repeat the same mistakes.

Take for example the Great Depression. For almost 80 years the left and their media minions have done everything within their power to blame all that era's ills on Herbert Hoover while crediting Franklin D. Roosevelt with the eventual economic recovery despite the former presiding over only two years of the Depression.

Yet, after eight years of unprecedented federal spending under Roosevelt, the unemployment rate was still a staggering 14.6 percent in 1940, and the Gross Domestic Product was still under its pre-Depression level.

Isn't this important, especially since our federal debt is already quite high?

Unfortunately, because of the partisanship, such can't be discussed. The left have so much time and money invested in Roosevelt supposedly being the greatest president of the 20th century that an honest assessment of what did and did not work back then is verboten. 

But isn't that absurd? Assuming we really are on the verge of another Depression -- an assumption I don't necessarily agree with yet, mind you -- shouldn't we be examining everything we did before and during the last one in order to chart a more effective course this time?

The fact is the last Depression began in 1931 and despite all Roosevelt's good intentions didn't end until America entered World War II in 1941. Once the war ended, we went back into a very serious recession suggesting that nothing Roosevelt implemented had a lasting positive economic impact.

Isn't this relevant, especially given the Congressional Budget Office's report last week predicting current stimulus plans will actually hurt the economy in the long run?

Sadly, the answer is "No," for the left are so protective of Roosevelt's legacy that any analysis of his economic policies is totally unacceptable even as our nation grapples with solutions to our current financial problems.

Is this the way adults should behave? Is this really the best we can get from our elected officials?

Given the known failings and wastefulness of last year's TARP, wouldn't we be well-advised to halt all current stimulus discussions until a thorough and impartial analysis of previous plans -- INCLUDING those implemented by us during the '30s and by Japan during the '90s -- was accomplished thereby increasing the likelihood of success while reducing the chance of us making exactly the same mistakes?

If the answer is "No," the only conclusion is that Party, at this critical juncture in our nation's history, is indeed more important than policy, and partisanship is asphyxiating our capital. 

George Washington must be rolling over in his grave.