As the housing bubble began to form, there was growing pressure on the Bush economic team to dampen the housing/derivative/securitization bubble. Economists from Stiglitz to Krugman begged Bush to pressure Greenspan to "take a way the punch bowl" by raising the cost of borrowing.
Remember: after 9/11, rates were reduced to 50 years lows and held there, thus dumping liquidity ("easy money") on an already dangerous bubble. They were forcing money off the sidelines into the bubble, drawing a tsunami of global capital into the only good returns in an otherwise stagnant economy.
Let's face it, Bush - like any politician, Left or Right - did not want to lose the political gains he got from a booming economy. Remember: in a post 9/11 world with growth killing gas costs, the housing boom was one of the only things driving economic activity and sustaining jobs. It would have been politically disastrous to kill it and face the full effects of a recession. (Better to let it burst at the end of your term and trap the stupid Liberal)
Secondly,
WHEN ASKED, Conservative economists said that markets are self-regulating and the housing bubble would correct itself before self-destructing and destroying the economy.
Greenspan, who was a collaborator of Ayn Rand, said that the housing bubble was no bubble at all - just a little froth, not a big problem. He and Bush decided to leave the market alone and let it work not only for the construction industry, but for the people getting rich off derivatives and swaps, and the countless Americans who took loans against their newly realized equity. The market was firing on all cylinders, and Republicans - as rule - do not interfere in markets.
Then the housing bubble burst and now over 50% of Americans are living inside a housing nightmare. The bubble's bursting hurt not only the idiots who bought houses they couldn't afford, but it hurt people who were able to pay their mortgages but who had no incentive to keep their home after it lost all its value.
Yes, we know it was stupid of the Liberals to push for expanded home ownership (though their policy was enacted in 1977 under Carter and was heavily regulated without any big problems). And yes, it was even stupider for Bush to put this theory of expanded home ownership into overdrive in order to salvage a post 9/11 economy.
[ame=http://www.youtube.com/watch?v=kNqQx7sjoS8]Home Ownership and President Bush - YouTube[/ame]
BUT, was it a mistake for Bush to do nothing during the formation of the largest bubble in American history? - a bubble which will not only swallow the Obama administration, but the next Republican administration as well. Which is to say, it will take a generation to re-capitalize the now bankrupt middle class consumer - and at least a decade to clear out all the bad debt (which Wall Street sliced up and sold all over the world . . . in the trillions).
Was it a mistake for Bush to trust that market would correct itself? Should he have called for Greenspan to take away the punch bowl before growing a bubble that ended-up sinking the world economy and destroying America long term?
Remember: after 9/11, rates were reduced to 50 years lows and held there, thus dumping liquidity ("easy money") on an already dangerous bubble. They were forcing money off the sidelines into the bubble, drawing a tsunami of global capital into the only good returns in an otherwise stagnant economy.
Let's face it, Bush - like any politician, Left or Right - did not want to lose the political gains he got from a booming economy. Remember: in a post 9/11 world with growth killing gas costs, the housing boom was one of the only things driving economic activity and sustaining jobs. It would have been politically disastrous to kill it and face the full effects of a recession. (Better to let it burst at the end of your term and trap the stupid Liberal)
Secondly,
WHEN ASKED, Conservative economists said that markets are self-regulating and the housing bubble would correct itself before self-destructing and destroying the economy.
Greenspan, who was a collaborator of Ayn Rand, said that the housing bubble was no bubble at all - just a little froth, not a big problem. He and Bush decided to leave the market alone and let it work not only for the construction industry, but for the people getting rich off derivatives and swaps, and the countless Americans who took loans against their newly realized equity. The market was firing on all cylinders, and Republicans - as rule - do not interfere in markets.
Then the housing bubble burst and now over 50% of Americans are living inside a housing nightmare. The bubble's bursting hurt not only the idiots who bought houses they couldn't afford, but it hurt people who were able to pay their mortgages but who had no incentive to keep their home after it lost all its value.
Yes, we know it was stupid of the Liberals to push for expanded home ownership (though their policy was enacted in 1977 under Carter and was heavily regulated without any big problems). And yes, it was even stupider for Bush to put this theory of expanded home ownership into overdrive in order to salvage a post 9/11 economy.
[ame=http://www.youtube.com/watch?v=kNqQx7sjoS8]Home Ownership and President Bush - YouTube[/ame]
BUT, was it a mistake for Bush to do nothing during the formation of the largest bubble in American history? - a bubble which will not only swallow the Obama administration, but the next Republican administration as well. Which is to say, it will take a generation to re-capitalize the now bankrupt middle class consumer - and at least a decade to clear out all the bad debt (which Wall Street sliced up and sold all over the world . . . in the trillions).
Was it a mistake for Bush to trust that market would correct itself? Should he have called for Greenspan to take away the punch bowl before growing a bubble that ended-up sinking the world economy and destroying America long term?
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