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.
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 [Jo Becker, Sheryl Gay Stolberg, and Stephen Labaton, "White House Philosophy Stoked Mortgage Bonfire," New York Times, 2008.12.20].
Now let me be clear:
- Expanding home ownership, for minorities and everyone else, is darn good idea.
- Home ownership promotes economic security (Bush said that).
- Real economic security comes from increasing income (your money), not from loosening credit (the bank's money).
Today, administration officials say it is fair to ask whether Mr. Bush’s ownership push backfired. [Treasury Secretary] Paulson said the administration, like others before it, “over-incented housing.” Mr. Hennessey put it this way: “I would not say too much emphasis on expanding homeownership. I would say not enough early focus on easy lending practices” [Becker et al.]
Becker et al. find blame to be laid at everyone's doorstep: Congress, corporate lenders, lobbyists, and the current and past administrations (don't forget dumb borrowers!). They note that a Bush administration official, Armando Falcon, Jr., then head of the Office of Federal Housing Enterprise Oversight, was ready in February 2003 to sound the alarm on Fannie Mae and Freddie Mac:
Mr. Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.
...[A]s Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.
His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon’s report had flagged [Becker et al.].
February 2003. Five years before the stimulus checks, the Bear Stearns buyout, and every other crisis maneuver this year that hasn't worked. One month before the president (with, yes, the approval of a majority of Congress and, at the time, even me) marched our troops into Iraq, where Bush now admits al-Qaeda was not.
My point is not that President Bush deserves all the blame. My point is that if you are going to play the blame game, you'll have a hard time pinning it on just one side of the aisle. A lot of us had our eyes on the wrong ball.