Former WH Chief Of Staff Card: “Maybe I Was Asleep At The Switch”
In a most scathing takedown of the Bush administration, the New York Times has identified just how culpable BushCo is for the financial crisis in America. “White House Philosophy Stoked Mortgage Bonfire” shows how inept this admnistration is. It might even make one long for the days of Herbert Hoover.
Bush wanted to expand the Republican base by making home ownership possible for everyone, but deregulation and a lax approach to lending did him in.
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.
“There is no question we did not recognize the severity of the problems,” said Al Hubbard, Mr. Bush’s former chief economics adviser, who left the White House in December 2007.
BushCo was overly focused on war, cutting taxes, and privatizing Social Security, and no one wanted to recognize the warning signs that the housing bubble was in danger. And Bush, himself, true to form, is pointing fingers everywhere but toward himself.
He cites corporate greed and market excesses fueled by a flood of foreign cash – “Wall Street got drunk,” he has said – and the policies of past administrations. He blames Congress for failing to reform Fannie and Freddie. Last week, Fox News asked Mr. Bush if he was worried about being the Herbert Hoover of the 21st century.
“No,” Mr. Bush replied. “I will be known as somebody who saw a problem and put the chips on the table to prevent the economy from collapsing.”
Because housing costs went up while income didn’t, Bush turned to government to make it easier for families to own homes. Bush leaned on Congress to spend up to $200 million a year to help families pay for down payments and closing costs, enabling first-time homeowners to purchase with no money down. And along the way, Bush was collecting big campaign contributions from the mortgage industry. Roland Arnall of Ameriquest, the country’s largest subprime lender when it was a top-10 Republican donor in 2004, had to set aside $325 million to settle allegations of predatory lending in 2005.
Andrew H. Card Jr., Mr. Bush’s former chief of staff, said White House aides discussed Ameriquest’s troubles, though not what they might portend for the economy. Mr. Bush had just nominated Mr. Arnall as his ambassador to the Netherlands, and the White House was primarily concerned with making sure he would be confirmed.
“Maybe I was asleep at the switch,” Mr. Card said in an interview.
Armondo Falcon, Jr. who ran the agency that oversaw Fannie and Freddie, was about to issue a report in 2003 warning that these agencies were in trouble and there could be “dangerous illiquidity in the market.” The day the report came out, the White House tried to fire him. The White House bumbled through the next couple of years, rife with miscalcualtions.
Throughout the spring of 2007, [Treasury Secretary Henry] Paulson declared that “the housing market is at or near the bottom,” with the problem “largely contained.” That position underscored nearly every action the Bush administration took in the ensuing months as it offered one limited response after another.
But can these bumbers learn from their disasterous mistakes?
With 31 days left in office, Mr. Bush says he will leave it to historians to analyze “what went right and what went wrong,” as he put it in a speech last week to the American Enterprise Institute.
Mr. Bush said he was too focused on the present to do much looking back.Click here for reuse options!
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