Americans are a feisty bunch. We like to cast credit and blame on the most obvious target. (See Cubs fans: Steve Bartman, 2003 NLCS, Game 6.)
And so in order to clear our personal resumes of any wrongdoing or even unintentional error, we assign all responsibility on someone else. Call it part of the “victim mentality” which permeates our culture. “It’s not my fault this happened.” If you have a teenager in your household, perhaps you have witnessed significant proclamations firsthand.
President Obama cannot alone solve our financial crisis. Strong in leadership as he may be, no large red and yellow “S” is concealed on his undershirt. Just as true, however, is that President Bush is not to blame for our financial crisis. This may be contrary to recent rhetoric, but the more we politicize economic policy, the greater is the probability that we will lack discernment in assessing appropriate responsibility. Bush certainly committed multiple mistakes (as all Presidents will do - again, back to the no red and yellow “S”), but destabilizing our economy was not one of them.
The best explanation I’ve heard to date comes from Barron’s, with an editorial this week written by Scott S. Powell, a senior VP at ELP Capital and a visiting fellow at the Hoover Institution. Powell writes:
“Today's problems have their roots in programs and financial instruments that shifted the locus of moral responsibility away from private individuals and institutions to wider circles that were understood to end with a government guarantee. Heads of the top banks and financial institutions could approve substandard home-mortgage underwriting -- prone to increased default -- because those loans could be securitized by Wall Street and sold off to investors or to government-sponsored enterprises (GSEs), with no likely recourse to the financial institution of origin.
Our present crisis began in the 1970s, during the Carter administration, with passage of the Community Reinvestment Act to stem bank redlining and liberalize lending in order to extend home ownership in lower-income communities. Then in the 1990s, the Department of Housing and Urban Development took a fateful step by getting the GSEs to accept subprime mortgages. With Fannie and Freddie easing credit requirements on loans they would purchase from lenders, banks could greatly increase lending to borrowers unqualified for conventional loans. In the name of extending affordable housing, this broadened the acceptability of risky loans throughout the financial system.”
Powell makes a great point, certainly an enlightening one for those of us who are novices in evaluating economic policy. Let me add one more encouragement from Mr. Powell:
“George Washington also warned against excessive partisanship, which distracts public councils and enfeebles public administration. Rather than blaming the party in power or the party formerly in power, the nation should stop living in denial of the mistakes of both parties.”
Did you hear that? The mistakes of both parties. Enough said.
AR
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4 comments:
thank you - finally someone who has more eloquently expressed what I have been saying for awhile. It also explains what happens when government tries to micromanage private financial decisions.
A quote from Pastor John Piper: "Recession has a way of making us wake up to the endless recession of millions. It has a way of changing our priorities and releasing effort and money for others." Maybe a productive response will be a changed focus on others in need rather than on whom is to blame. I know that's been true for me.
Yes-wouldn't it be wonderful not to rely on situations such as this to change our focus to what is truly important? Having said that, it would also be wonderful not to repeat mistakes and hopefully learn from them.
I love the focus on both parties. We spend too much time blaming each other and playing politics. The Dems should quit blaming Bush. The Reps should quit blaming Obama. Now the Congress? That's a different story!
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