The public policy blog of the American Enterprise Institute

Subscribe to the blog

Discussion: (12 comments)

  1. wait! mortgage-based securities did not cause the collapse?

    the problem I have here is the wanton willingness to avoid the other realities occurring… that time….

    What exactly was the Fed SUPPOSED to be doing instead when Bush stood in front of the country and tried to explain disaster he said he did not understand?

    1. wait! mortgage-based securities did not cause the collapse?

      Ya, I noticed that Pinto and Wallison have been pretty silent lately. Some black person in Shaker Heights, Ohio and some Hispanic person in Rio Rancho, New Mexico were approved for a mortgage under the Community Reinvestment Act in 1999 and 2002, respectively, causing Lehman to declare bankruptcy in 2008.

      It’s ABB syndrome. Anybody But Bush.

    2. Most of the blame has been placed on the symptoms, not the disease. The securities collapsed because the housing bubble burst, not the other way around. The government set up the system that inevitably caused the crash, allowed the MBS’s to be created, coerced banks to make bad loans, and told the banks, “That’s OK, we’ll buy the bad mortgages from you.” The Fed created the nearly-free-interest money to add to the recipe. It was only a matter of time, as predicted by the NY Times in 1999.

      1. I essentially agree that the govt had a role but so did the private sector who sold the mortgages to people who should not have had them.

        I find it exceptionally hard to believe that a single congressman told Fannie/Freddie what to do.

  2. A careful reading of the article provides the answer to the question raised above… provide more liquidity not less. How anyone can connect what President Bush said to the Fed’s monetary tightening is a mystery only the blame Bush folks can explain.

    1. re: ” blame Bush ”

      who appointed Bernanke?

      1. MacDaddyWatch

        Looking backwards is never productive. Romney has already promised to fire and replace BB.

        1. re: ” Romney has already promised to fire and replace BB.”

          well yes.. of course.. he said that to please the wing nuts.

          is this just a slight different version of “blame”?

          Or are you implying that Romney is smarter than Bush was? Bush was a CEO, right?

          If Bernanke screwed the pooch – and Bush appointed him, what exactly was Bush – and Congress who confirmed him – expecting him to do – or not?

          how would that be any different under Romney?

          the whole narrative is, in fact, looking back… blaming Bernanke and not Bush.

          How convenient!

          Obama can’t blame Bush but we can all blame Bernanke?


  3. MacDaddyWatch

    The Fed is always a central player in any economic unraveling–rates far too low for far too long. But when HUD (under Andrew Cuomo, now Dem gov. of NY) started to enforce its new mortgage quotas (70% home ownership was the target never quite attained), the tried and tested credit criteria for mortages were replaced by a liberal social agenda and loans were made to people who could never possibly pay them back–the jobless with no incomes and no assets. Fannie and Freddy, both government sponsored enterprises, facilitated and accelerated the collapse–they were big subprime buyers.

    Millions of perfectly good renters suddenly became millions of perfectly horrible owners. The rest is history.

  4. Rimvydas Mieliauskas

    A global crisis – forecast…

    My letter is about the next stage of the current crisis. Now about my forecast accuracy – as I chose a job in Scotland in 2005, I have been thinking about this crisis; I knew, that it is unexpected and that it lasts until 2020. Nouriel Roubini predicted the twelve stages of current crisis, I predicted the first eight stages – how it will start and develop in USA and UK, but I didn’t predict that it covers the whole world and in 2005 I knew that 2020 China will be the largest economy in the world.

    Global debt and derivatives market is like a gigantic house of cards, if you take a one card or a one big bank out, you are having crash, as show 2008 crisis, now this gigantic financial house of cards is very fast growing – FINANCIAL IMPLOSION: Global Derivatives Market at $1,200 Trillion Dollars … 20 Times the World Economy

    USA, UK, EU and Japan are trying to fix a this gigantic financial bubble or a house of cards by printing the money: trillions dollars, pounds, euro, yen, it is visible part of this crisis and there is invisible part – the tax havens, where is 21-32 trillions $ – main reason for this crisis and the biggest danger now.

    A dollar crash is inevitable, as now is going the four processes, which can not be stopped:
    1. The ever worsening economic situation in the world, because has been not eliminated a main reason for this crisis – the financial black holes – tax havens: sixty years ago, USA companies accounted for 32.1% of the federal tax take, but by 2009 that proportion plummeted to 8.9%, over the same period, the burden on ordinary workers (paying standard payroll tax) soared from 10% to 40% of all federal tax receipts, according to official data, the same processes took place in all developed countries and the tax havens sucked from world economy 21-32 trillions $.
    2. The decreasing dollar market share.
    3. The protectionism, the regulation of investment, prohibition to sell the most important companies and more and all these measures have been taken to guard against the dollar…
    4. The global system of the tax havens is becoming every year bigger and stronger and more influential, it is practically impossible to reform it now, as show the tax havens history.
    A only way to reform the global financial system and central part of it – the tax havens, is crash, a only one question is when?


  5. So many assumptions and questionable statements yet so little time. Some of their interpretations leave something to be desired. One would be the first statement in the paragraph, the spread of U.S. recession had already taken hold Europe by that point. Also, it’s a bit presumptuous to interpret U.S. gov’t bond market movements as having wider implications than a flight to quality in the short-run. I could go on but while I think NGDP targeting could be an interesting tool the people advocating for it don’t make a decent case.

  6. I am not an economist, but when you consider the massive $$ the fed made available with treasury thru bailouts AIG , CITI etc it seems hard to blame the fed for tightening. The panic in the financial markets was because people felt the banks were going broke not because it suddenly dawned on people that Europe was in trouble. The revisionists who want to blame the fed should be happy they were there to improvise a solution to the disaster

Comments are closed.

Sort By:

Refine Content:


Additional Keywords:

Refine Results

or to save searches.

Refine Content