(Source: The Philadelphia Inquirer)
The first three weeks of the financial crisis were no time for recriminations _ so important was it to focus on passing a bailout plan to keep the credit markets from seizing up.
Well, the first bailout proposal died in the House, the executives who drove Lehman Bros. into the ground still stand to collect their $2.5 billion in bonus checks, and the credit markets are still functioning. So perhaps it's time to start pointing some fingers.
The most obvious target is President Bush. It's important to note that Bush didn't do anything to cause the crisis. His were sins of omission.
He appointed two middling managers to lead the Treasury Department. And he refused to deal seriously with oil prices after 9/11, when it became clear that U.S. military action (albeit necessary) would create long-term uncertainty in the market.
The gas crunch put the economy on edge, but the fundamental problem was the subprime-lending spree of the last decade and the trade in mortgage debt, which amplified the effects of defaulted loans.
Again, none of this was Bush's doing. But the president sat idly by while the entire housing industry plotted its own destruction. Banks made ridiculous loans to people who had no way of repaying them. Worse, the banks then sold and resold the loans as "investments," spreading the contagion. The consequences of this foolishness were not impossible to predict.
And not only did President Bush do nothing; he actually lauded the irresponsible spree. He praised programs designed to give mortgages to families with bad credit.
One of the boasts of his 2004 campaign was the record level of home ownership, particularly among lower-income people _ who couldn't afford the homes they had bought. He mistook a symptom of economic sickness for a sign of economic health.
Democrats were no better. They attacked anyone who questioned the bad loans being facilitated by Fannie Mae and Freddie Mac, or who proposed reforming those institutions. In 2002, for instance, Rep. Barney Frank, D-Mass., called the companies "great assets." In 2003, Frank insisted that Fannie Mae and Freddie Mac "are fundamentally sound financially and (can) withstand some of the disaster scenarios." Oops.
And where do we go from here? Neither of the two men who would be president has a firm grasp of economic theory. McCain's economic advisers include men such as Jack Kemp, Phil Gramm and Peter Peterson, whose worldviews completely contradict each other.
