By now everyone has heard the liberals on the left blame George W. Bush for the economic crash that was preceded by a banking crisis which was preceded by a housing collapse. The housing collapse was decades in the making and began when Jimmy Carter passed the Community Reinvestment Act in 1977 and Bill Clinton Amended several times during his presidency which made it even worse. However, we’ll get into the specifics of the CRA at a later date.
For now we will focus on whether or not GWB is actually to blame for the housing collapse which started this whole mess. Let’s delve into GWB’s repeated attempts to reform government sponsored enterprises, aka Fannie Mae, Freddie Mac and the Federal Home Loan Banking System. We’ll also look at a few comments from some of the liberals who were in Congress at that time. Let’s start at the top and remember that GWB came into office on 1/20/2001…..
April 2001- In the President’s FY2002 budget on page 142, in the section titled Budget Analytic Perspectives Bush declared 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.”
May 2002- In a letter to the Office of Federal Housing Enterprise Oversight dated 5/29/2002, the Office of Management and Budget called for the disclosure and corporate governance principles contained in the President’s 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac.
February 2003- The Office of Federal Housing Enterprise Oversight (OFHEO) released a report explaining that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market.
September 2003- Treasury Secretary John Snow testified before the House Financial Services Committee and recommended 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.
September 2003- House Financial Services Committee Ranking Member Barney Frank (D-MA) strongly disagreed with the Administration’s assessment, saying “these two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
October 2003- During a hearing of the Senate Committee on Banking, Housing, and Urban Affairs on 10/16/2003 Senator Thomas Carper (D-DE) refused to acknowledge any necessity for GSE reforms, saying “if it ain’t broke, don’t fix it.”
November 2003- In his remarks at The Conference Of State Bank Supervisors State Banking Summit And Leadership on 11/6/2003, Council of the Economic Advisers (CEA) Chairman Greg Mankiw explained that any “legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk.” He went on to say that in order 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.
February 2004- In the President’s FY2005 budget again under the section Budget Analytic Perspective on page 83 it highlighted the risk posed by the explosive growth of the GSEs and their low levels of required capital and called for the creation of a new, world-class regulator: It stated “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.”
February 2004- Council of the Economic Advisers (CEA) Chairman Greg Mankiw again cautioned 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.”
April 2004- Representative Barney Frank once again ignored the warnings and accused the Administration of creating an “artificial issue.” At a speech to the Mortgage Bankers Association conference, Rep. Frank said “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.”
June 2004- In House Financial Services Subcommitee on Oversight and Investigations testimony on 6/14/2004 Treasury Deputy Secretary Samuel Bodman highlighted 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.”
April 2005- During testimony before The U.S. House Financial Services Committee on 4/13/2005 Treasury Secretary John Snow repeated 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.”
July 2005- Minority leader Harry Reid rejected legislation reforming GSEs, saying “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.”
August 2007- At a press conference at the White House on 8/9/2007 President Bush emphatically called 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.”
August 2007- Senate Committee on Banking, Housing and Urban Affairs Chairman Christopher Dodd ignored the President’s warnings and called on him to “immediately reconsider his ill-advised position.”
December 2007- In a discussion on housing at the White House on 12/6/2007 President Bush again warned 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.”
February 2008- During testimony on reforming GSE regulation at the Senate Committee On Banking, Housing And Urban Affairs on 2/7/2008 Assistant Treasury Secretary David Nason reiterated the urgency of reforms, saying “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.”
March 2008- In Remarks to the Economic Club of New York on 3/14/2008 President Bush called 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.”
April 2008- During a meeting with his cabinet at the White House on 4/14/2008 President Bush urged 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.”
May 2008- President Bush issued several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorated any further, including:
In a radio address on 5/3/2008 President Bush said, “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.”
In a meeting with the Secretary of the Treasury at the White House on 5/19/2008 President Bush said, “The 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.”
In a radio address on 5/31/2008 President Bush said, “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.”
June 2008- As foreclosure rates continued to rise in the first quarter, at the swearing in ceremony for Secretary of Housing and Urban Development in WashingtonD.C. on 6/6/2008 President Bush once again asked Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.”
For more than seven years Congress ignored George W. Bush’s repeated calls to address the housing crisis that was looming. It wasn’t until July of 2008 that Congress finally heeded the President’s call for action and passed reform legislation for Fannie Mae and Freddie Mac as it became clear that the institutions were failing.
In September of 2008 Democrats in Congress proved their complete and utter stupidity after numerous previous objections to GSE reforms when Senator Frank Dodd said, “Why weren’t we doing more, why did we wait almost a year before there were any significant steps taken to try to deal with this problem? I have a lot of questions about where was the administration over the last eight years.”
To be sure, this housing crisis was decades in the making and it began with the worse presidency in American history prior to the current administration. We’ll get into the specifics of Jimmy Carter’s CRA and the amendments made by other administrations, primarily Bill Clintons at a later date. However, George Bush attempted to fix the problem on eighteen different occasions over a seven year period. It was the Democrats in Congress who REPEATEDLY ignored the President and continually claimed there was no problem.
The next time some liberal piece of garbage blames Bush for the housing crisis. Educate them and let them know where the blame should be placed. As soon as they start hurling personal insults, you know you’ve won the argument.