The New York Times added another entry to its “The Reckoning” series yesterday, this one focusing on the Bush Administration’s role in the housing mess. Today, Bush fired back with a blistering press release accusing the Times of gross negligence.
So let’s see how the story stacks up.
First of all, it’s a necessary story and a good one with lots of quotes and new information from Bush officials—many on the record—about how the administration missed the problem, downplayed it, and helped to make it worse. While he didn’t cause the crisis (and is not alone in sharing presidential responsbility for it—I’m looking at you, Bill Clinton) and some of the key factors were out of his control (like Greenspan’s easy money policy), there can be no doubt that Bush has culpability here: It happened on his watch over several years—and the problems that led to it not coincidentally dovetail neatly with his laissez-faire philosophy of regulation.
“There is no question we did not recognize the severity of the problems,” said Al Hubbard, Mr. Bush’s former chief economics adviser, who left the White House in December 2007. “Had we, we would have attacked them.”
Bush flack Dana Perino has both barrels blazing in her press release saying “the reporters’ myopic point of view that only Bush administration policies could possibly be responsible for the housing and finance crises.” But that’s a straw man; it’s not what the Times says. For instance, this is up high, in the eighth paragraph:
There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.
Here is how the Times in the next graph sums up Bush’s responsibility:
But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.
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.
This is uncontroversial, but I agree with Barry Ritholtz who says that the Times doesn’t quite nail the heart of Bush’s responsibility here, though it’s certainly not incorrect in what it does report. Here’s Ritholtz:
That philosophy, and the executive, administrative and legislative acts, including political appointments, is where we should focus our ire at the soon the be former-President Bush. The belief system that leads to the conclusion that really bad behavior in the corporate world needs no proscribing is where you should look to place blame.
That Bush had as a goal increased home ownership is, quite bluntly, irrelevant. It is a worthy goal, and certainly one that could be achieved without forcing the collapse of the financial system.
I agree that the story overemphasizes Bush’s focus on increasing home ownership as a root cause of the crisis. That didn’t cause Wall Street underwriters to push for “loans, loans, any loans” so it could bundle them, make millions in fees, and pass them off to others. It didn’t cause subprime lenders and brokers to forget the basic rules of lending.
There’s no question that putting somebody in a house without a down payment isn’t a good idea, as Bush’s program did for some. But that was, as the Times reports, $200 million a year. That doesn’t even qualify as a drop in the bucket in the trillion-dollar mortgage industry, and the paper was wrong to give that so much emphasis.
It gets to the real issue down about halfway through the story:
But Mr. Bush populated the financial system’s alphabet soup of oversight agencies with people who, like him, wanted fewer rules, not more.
The administration’s response is bizarrely weak and almost not worth mentioning. Their essential beef is that the Times didn’t know about or mention Bush’s primetime address to the nation on the crisis. That address was on September 24—of this year. It was years after anything the Times was reporting about and was just utterly inconsequential, not only for this story, but of any impact, period. The cat had been out of the bag for two years—meaning the bubble had already popped—by the time of this speech.