2008 mortgage crisis/Clinton

Woozle comments

As of 2008-10-02, this article has been widely circulated as proof that Bill Clinton caused the current meltdown:

• Flashback to 1999: Origins of the Credit Crisis: this article is credited by some of the others
• [1]
• [2]
• [3], referring to this in the now-suspect WSJ (an article which also defends deregulation and claims that it is not responsible for the problem... just ignore those trillion$ of derivatives investments...)
• Yes, politicians really did create the mortgage meltdown
• 2008-10-03 How Government Stoked the Mania: again the WSJ...

However...

1. What's not clear is why anyone thinks that this would cause a crisis 8 years later, rather than sooner. Also, why such a huge crisis, and so suddenly?
   • Has anyone done a survey of recent mortgage defaults to see if any significant percentage of them seem to be a result of the action described?
   • For that matter, has any kind of survey *at all* been done of those defaults, rather than blaming first and aiming later?
2. How much of a role has the subprime mortgage crisis played in the current situation? My understanding is that the dollar volume involved in the derivatives market is somewhat as Lake Superior to a farm pond.
   • What about the debt incurred by the largely unnecessary expenditures in Iraq? Just a quick Google comes up with slightly over half a trillion dollars ($559 billion) spent there -- about 70% of the proposed bailout. (This figure would probably not be diminished much by subtracting out the amount Bush claimed it was going to cost, which I suppose one might argue we had all agreed was a worthwhile expenditure and therefore shouldn't be counted, so go ahead and subtract it out if you can find it.)
   • Just looking at the subprime mortgage question: it is possible that this was a bad call by Clinton. However:
     1. Clinton was trying to do a good thing, and as I understand it the indications at the time (aside from what the AEI said) were that it would not be harmful -- unlike many things done by Bush, where everyone (except his circle of misadvisors) was telling him to stop. If Clinton made a mistake on this one, it seems to me he can easily be forgiven because it was a reasonable mistake to make and he got so many other things right. (Like, say, Osama bin Laden being a threat.)
     2. For every default on a loan to a "minority or low income consumer", how many have remained current? (Presumably 9 years isn't enough to expect that very many would be paid off... but perhaps there is a sample of 5- and 10-year loans among those made at the time, where we could actually answer the question of net loss/profit on that group of loans. Is anyone looking into this?)

I'd really like to see some discussion of these questions before the neocons go happily shouting everywhere that Clinton is to blame for the meltdown... but I doubt that will happen, because the only truth they're interested in is whatever they can convince the overwhelmingly misinformed public to believe.

--Woozle 23:18, 2 October 2008 (UTC)

addendum - first rebuttals

• 2008-09-30 Conservatives Try To Dodge Responsibility For Crisis By Blaming Poor People

While most economists blame the current crisis on market failure and sparse

regulation, conservatives are attempting to elude responsibility by smearing the victims of predatory lending. As Matt Yglesias points out, "it was conservatives who watched as the housing bubble developed and it was conservatives who blocked any action to try to ensure a soft landing once the bubble popped".It was conservatives who blocked efforts to curb predatory lending and it was conservatives who blocked efforts to investigate fraud

more robustly.

Congress passed the Community Reinvestment Act in 1977; Bush started weakening enforcement in 2004. Which act do you think was more likely to have been the cause of a crisis in 2008?

But stop the presses -- this connection (blaming the 1977 CRA for the current meltdown) was refuted back in *April*:

• 2008-04-07 Did Liberals Cause the Sub-Prime Crisis?

...it is hard to blame CRA for the mortgage meltdown when CRA doesn't even

apply to most of the loans that are behind it. As the University of Michigan's Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA. A further 25 to 30 percent came from bank subsidiaries and affiliates, which come under CRA to varying degrees but not as fully as banks themselves. (With affiliates, banks can choose whether to count the loans.) Perhaps one in four sub-prime loans were made by the institutions fully governed by CRA. .. Most important, the lenders subject to CRA have engaged in less, not more, of the most dangerous

lending.

The people pushing this meme are not interested in facts, however, knowing that a large chunk -- perhaps a majority -- of voters believe that "you can prove anything with facts".