Reckless Endangerment - II

During the first term of the Obama presidency, the President and his Democrat supporters developed an effective meme: George W. Bush was solely responsible for the financial crash of 2008 and therefore, Barack Obama was a victim of Bush's missteps and could not be blamed when he failed to reduce unemployment, failed to reign in spending, and failed to reduce the nation's debt, but rather increased it to "save" us from Bush's financial crash. Like all good lies, the "Bush did it" meme worked because it had small elements of truth, but that's all it had.

In their book, Reckless Endangerment, Gretchen Morgenson and Joshua Rosner (both left of center) dissect the 2008 financial crash and lay blame appropriately—on both political parties. Further, they note that the financial crash had its origins in the progressive, "best of intentions" housing policies of Bill Clinton.

Noemie Emery summarizes rather nicely:

In 1995, President Clinton launched his "National Homeownership Strategy" (Bush continued it as part of his "ownership society"), designed to increase mortgage lending to low-income Americans by requiring bankers to make loans to people with poor or nonexistent credit ratings. This drew in people who were unable to pay off their debts, and speculators, who were betting housing prices would keep rising forever. In retrospect, we can see it was bound to implode, and it did.

Clinton and Bush were both smart politicians, but there was one thing that both men got wrong. As Glenn Reynolds explained, they tried to expand the middle class by subsidizing things owned by middle-class people -- like college educations and homes -- assuming that middle-class status would come along with them. But in fact, home ownership was a result of middle-class values -- of being willing and able to save, and to defer gratification -- and not the cause of them. Instead of expanding the middle class, dodgy home loans for people with no past record of saving merely led to unfunded investments and debt. And to speculation. "All of us participated in the destructive behavior -- government, lenders, borrowers, the media, rating agencies," said Warren Buffett. "At the core of the folly was the almost universal belief that the value of houses was bound to increase."

Twice, Bush tried to rein in Fannie Mae and Freddie Mac, and twice Democrats (Obama included) moved in to stop him. Especially culpable were Barney Frank and Chris Dodd. Dodd claimed that the institutions were "fundamentally strong," and Frank said he wanted to "roll the dice a little bit more in his situation" rather than impose stricter regulation on Fannie and Freddie. He did roll those dice, and they came up snake eyes at the end of the Bush years. The same could have just as easily happened in the Gore or Kerry administrations, had they existed, and it would not have been due to their policies, either. It was due to bad sense, bad judgment, greed and a lot of misguided good will.

Bush didn't create the conditions that led to the crash; he inherited them from Bill Clinton, and a large cast of thousands all played their own parts. Republican policies had no role in the crash; and the Democrats' policies would have had no role, either.

This was not a case of free markets run wild; it was a case of government policy distorting the markets by removing their built-in restraints.

But the democratic "Bush did it" meme was a strong one, and because Obama's many friends in the main stream media did absolutely nothing to assess its validity, it became conventional wisdom. In fact, although Reckless Endangerment was a #1 NYT best seller, the usual MSM talk shows and interviews avoided Morgenson and Rosner as if they had some communicable disease. They did—its called the truth.