It's official: President Bush is to blame for everything.
Sunday's big front-page story "Bush's Philosophy [1]Stoked the Mortgage Bonfire [1]," was topped with a large photo of the president from the summer of 2002, a grinning Bush standsin front of a sign reading "A Home of Your Own." It's one of the most flattering photos the Times has even run of the president, and is apparently there only to sharpen the irony of the article itself, which accused the Bush administration of wrecking the economy with irresponsible "laissez-faire" home-ownership policies (never mind that every president has pushed home ownership).
The three reporters on the byline included Sheryl Gay [2]Stolberg [2]and Stephen [3]Labaton [3], both of whom have long-established hostilities against conservatives and conservative ideas. Typically, they offered only glancing acknowledgement that other factors besides Bush were involved in the mortgage meltdown and the resulting financial crisis: There are just ten mentions of Congress in the 4,900-word story.
The global financial system was teetering on the edge of collapse when President Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, "scared the hell out of everybody."
It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Mr. Bush had agreed to pump $85 billion into the failing insurance giant American International Group.
The president listened as Ben S. Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.
Then his Treasury secretary, Henry M. Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history.
Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.
"How," he wondered aloud, "did we get here?"
Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, "faced with the prospect of a global meltdown" with roots in the housing sector he so ardently championed.
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.
Conspicuously absent from that brief blame list is Congress, and specifically Congress's most ardent defenders of Fannie Mae and Freddie Mac, Democrat Rep. Barney Frank and Sen. Chris Dodd. Throughout the story the Times did the bare minimum of acknowledging the president's attempts to regulate the quasi-government mortgage finance giants, then blaming him at the end.
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.
Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Mr. Bush chose to oversee them - an old prep school buddy - pronounced the companies sound even as they headed toward insolvency.
As early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming. And when the economy deteriorated, Mr. Bush and his team misdiagnosed the reasons and scope of the downturn; as recently as February, for example, Mr. Bush was still calling it a "rough patch."
The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis.
The paper focused the blame on Bush's war, and Bush's tax cuts, and Bush's Social Security push:
For much of the Bush presidency, the White House was preoccupied by terrorism and war; on the economic front, its pressing concerns were cutting taxes and privatizing Social Security. The housing market was a bright spot: ever-rising home values kept the economy humming, as owners drew down on their equity to buy consumer goods and pack their children off to college.
....
The president did push rules aimed at forcing lenders to more clearly explain loan terms. But the White House shelved them in 2004, after industry-friendly members of Congress threatened to block confirmation of his new housing secretary.
In the 2004 election cycle, mortgage bankers and brokers poured nearly $847,000 into Mr. Bush's re-election campaign, more than triple their contributions in 2000, according to the nonpartisan Center for Responsive Politics. The administration did not finalize the new rules until last month.
A now-familiar Democratic face made an appearance as an economic Cassandra:
That fall, Representative Rahm Emanuel, a leading Democrat, former investment banker and now the incoming chief of staff to President-elect Barack Obama, warned the White House it was not doing enough. He said he told Joshua B. Bolten, Mr. Bush's chief of staff, and Mr. Paulson in a series of phone calls that the credit crisis would get "deep and serious" and that the only answer was big, internationally coordinated government intervention.
"You got to strangle this thing and suffocate it," he recalled saying.
For all the blame heaped on the Bush administration, Noel Sheppard pointed out in an able dissection at Newsbusters [4] that Fannie Mae was lowering its standards on home loans back in September 1999 (during the Clinton administration, for those keeping score). His source? Why, the September 30, 1999 edition of the New York Times:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets - including the New York metropolitan region - will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates - anywhere from three to four percentage points higher than conventional loans.
That Times storyeven predicted bad things might happen, quoting a source from a conservative think tank:
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
The paper's big Sunday piece also ignored other possible landmarks (from a liberal perspective, anyway) on the road to the mortgage meltdown, such as Democratic President Bill Clinton signing the Financial Services Modernization Act of 1999, which repealed the Glass-Steagall Act and allowed banks, brokerage firms, and insurance companies to offer the same services.
In an unusual move, the White House released a statement Sunday that took strong issue [5]with the story and the Times' journalistic professionalism in general:
The Times' 'reporting' in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn't fit their point of view...the reporters gave glancing attention to the fact that it was this Administration that pushed for strengthened regulation and oversight, greater transparency, and housing reform.
The story also gives kid glove treatment to Congress. While the Administration was pushing for more transparent lending rules and strengthening oversight and supervision of Fannie and Freddie, Congress for years blocked attempts at stronger regulation and blocked reform of the Federal Housing Administration. Democratic leaders brazenly encouraged Fannie and Freddie to loosen lending standards and instead encouraged the housing GSEs to play a larger and larger role in the housing market - even while explicitly acknowledging the rising risks.