Who Are the Hidden Culprits of the Economic Crisis?

By Con George-Kotzabasis

A retort to: Bush Will Address The Nation

By Steve Clemons The Washington Note September 29, 2008

My dear Steve, I’m saying this with great regret that your ‘amok’ propensity and desire to blame the Bush administration “for the reckless stewardship of America’s economic and security portfolios” for the purpose of justifying yourself of your flippant and irresponsible position on the issues of the war and the economy, is blatantly biased and dishonourable.

In your eagerness to make your case you totally disregard that the roots of the economic crisis lie in Democratic administrations and their caravanserai of Democratic activists, among whom Barak Obama was one who, as Tahoe Editor says correctly, was “suing banks for not taking riskier & riskier loans.” Fannie Mae, Freddie Mac (The most ‘populist’ of names), and The Community Reinvestment Act, that are the cornerstone of the economic crisis, were the offspring of Democratic administrations. It was “the Clinton administration’s resurrection of Jimmy Carter’s 1977 Community Reinvestment Act which appears to have been the major single factor ( My emphasis) in the origins of American high-risk sub-prime loans.” Under Clinton “banks were required to provide loans on an affirmative action basis to poor inner-suburban ghettoes” irrespective of the latter’s insecure financial position. And it was the Republican senator Phil Gramm who denounced Clinton’s program as “a vast extortion scheme.”

Indeed, the US Senate finance committee in 2005, after the warning of Federal Reserve chairman Alan Greenspan of an imminent financial collapse if Fannie Mae’s activities were not reined in, proposed a bill that would increase scrutiny of Fannie Mae’s accountancy mechanisms. The bill however was opposed by the Democrats, while Obama kept his silence, and was lost.

I’m sure if you had taken the above facts into consideration you would not have condemned so gratuitously the Bush administration for the current economic crisis. Once again it was ‘peanut’ politicians and the ignorant crowd of good intentions that has cast America into the present hell.
As I’ve said four days ago in a post of mine on The Atlantic. com , if the corporate greed of Wall Street and the insouciant complacency and unimaginative stand of regulators have brought the American economy to the brink, it will be obscurantist democratic populism and its weak politicians, as it has been exemplified by the vote in Congress yesterday, that will push the economy over the abyss.

Once again the economically ignorant populace and politicians in their wrath and outrage to punish Wall Street, are raising the psychologist’s demon of “altruistic punishment” by which ironically they will be punishing themselves and most of all America.

Your opinion...
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Steve Clemons September 30th, 2008 7:58 pm

Kotz — thanks for your note, as always. I will try to respond in greater detail later - but I think that you know given our several dramatic (and fun) exchanges that while our views are different and that we probably strongly disagree, I’m surprised that you would call me dishonest and dishonorable. I think that the notion that the Community Reinvestment Act is responsible for banks giving loans that were not credit-worthy is flawed. But I will refrain from calling this view dishonorable or dishonest. I just feel that it is flat out wrong.

Look forward to further exchanges on this and other things soon. I’m off to give a talk about the economic crisis and the reckless stewardship of the Bush administration (or parts of it - as Larry Lindsay, Bob Zoellick, Paul O’Neill and others were all quite capable).
But please — you know much better than to take these debates into territory about personal honor…

best, steve clemons

Con George September 30th, 2008 8:47 pm

My dear Steve–you completely misunderstood me. I was not referring to your “personal honor” which you must know from my posts on your blog how much I admire. I considered your condemnation of the Bush administration for the ills of the American economy not to be “dishonest” but intelectually dishonorable precisely because of your intellectual stature and because you disregarded the facts related to the Community Reinvestment Act. I believe that if you had taken these facts in consideration you would have made a more balanced critique of the Bush administration precisely because of the impartiality and generosity of your nature, thus keeping intact yourself your intellectual honor.

My best wishes as always
Kotz