Someone must have screwed up, because when Bush made his speech the other night, he actually got part of it right. In the past 7 years, you can probably count on one hand the number of times that has happened. It’s probably lower than mere chance would allow!
I’ve said it before, but it bears repeating – GWB is the worst president in my lifetime – perhaps ever. I’m 46, so that includes such fuck ups as LBJ, Nixon (who actually bears the brunt of the blame for removing us from a semi-gold standard which led to the financial mess of today) Ford, Carter (I didn’t think anyone could ever top Carter in incompetence!), and Bush I.
The Daily Show had a great segment last night comparing the speech Bush made before the start of the Iraq invasion to the one he gave Wednesday night. Pretty hilarious! Terms like “crisis”, “immediate action”, “urgent”, etc, were used in almost the exact same context in 2003 as they were in 2008 – and both were mostly lies.
Anyhoo – here’s the part that Bush got right. I’ll highlight a few things that I feel are especially pertinent to this “crisis”.
Here’s part of Bush’s speech as transcribed on Whitehouse.gov:
First, how did our economy reach this point?
Well, most economists agree that the problems we are witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions — along with low interest rates — made it easier for Americans to get credit. These developments allowed more families to borrow money for cars and homes and college tuition — some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.
Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit — combined with the faulty assumption that home values would continue to rise — led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.
Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected — along with mortgage payments they could not afford. As a result, many mortgage holders began to default.
These widespread defaults had effects far beyond the housing market. See, in today’s mortgage industry, home loans are often packaged together, and converted into financial products called “mortgage-backed securities.” These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.
There’s not much disagreement anyone should have with that. One point that I want to make sure everyone understands is what started this process – the Feds lowered interest rates too far, and kept them artificially low for waaaay to long. Individuals and institutions basically had free money to play with – and they played.
I’m in the IT business, and when we have a problem, we conduct a “root cause analysis” which examines the real cause of the problem, then we use that info to figure out how to prevent the problem from happening again – ever.
So, root cause for this “crisis” is the Federal Reserve interest rate policy from about 2002 through 2005. Still with me? Good.
So, what enabled the problem to continue until it reached “crisis” proportions? Fannie and Freddie – the Government Sponsored Enterprises (GSE’s) – bought up the bad debt from the companies who originated the bad loans – enabling them to originate more bad loans because they didn’t have to worry about being paid back.
Fannie and Freddie had already paid them, so they had money to lend to make more bad loans…. Which they sold to Fannie and Freddie which enabled them to make more bad loans…. Which they sold to – I hope you get this, because I don’t want to say it again!
Ok, still with me?
There’s one last key part that needs to be mentioned. The part where Bush said “many believed they were guaranteed by the federal government”. This is key because investors (including many foreign governments, hedge funds, and state pension funds) bought the mortgage backed securities from Fannie and Freddie specifically because they had an implicit guarantee from the federal government – after all, what does “Government Sponsored Enterprise” mean?
So what’s the key ingredient in all of these key points? The government. The federal government created this mess, the federal government kept it going and growing long after normal market forces would’ve caused it to slow down or stop, and the federal government got gullible investors to buy up the toxic crap, repackage it, and sell it to other (still more gullible) investors.
This same government is the one who now says they need $700 billion and a bunch of new regulations to clean up the mess. And a bunch of people and gullible investors believe them! Give me a break!
Here’s the gk plan – let the stupid assholes who spent more than they could afford, gave loans to people who couldn’t pay them back, and bought the loans from the people who originated them – let them all eat cake.
Let them go broke. Wiped out. Bankrupt, disappear, and otherwise vanish. The are stupid and they should reap what they sowed. Idiots!
But that’s not Bush’s plan. His plan is to make all of us fork over our money to bail out these stupid people. That’s a dumb plan. I don’t care if it’s called a bail out or a rescue, it’s still a dumb plan