If you don’t read this post, read the very last line.
Charlie Rose interviewed this fellow September 30 on the crash and bailout.
Martin Feldstein is an American economist. He is currently the George F. Baker Professor of Economics at Harvard University, and the president and CEO of the National Bureau of Economic Research (NBER). From 1982 to 1984, Feldstein served as chairman of the Council of Economic Advisers and as chief economic advisor to President Ronald Reagan (where his deficit hawk views clashed with Reagan administration economic policies). The video clip here.
Feldstein’s answers were very clear. He shows that the White House and our government were highly aware of impending problems, were discussing it for years, failed to act even though they were equipped with the regulatory tools to avoid this calamity – a supervisory failure.
Martin Feldstein points to Bush without wavering. He points to extremely slack ratings agencies, and he puts White House dereliction of supervision squarely in the center of the greatest financial mess since the 1930s.
Just days before New York’s Eliot Spitzer was shamed out of office, he published an opinion in the Washington Post, February 2008, How the Bush Administration Stopped the States From Stepping In to Help Consumers. Spitzer seems livid in this piece.
Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers’ ability to repay, making loans with deceptive “teaser” rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
The White House invoked a clause from the 1863 National Bank Act to freeze state lending laws, “thereby rendering them inoperative“. Spitzer concludes, days before he’s drummed out of his career,
“When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.”
The collapse of Fannie, Freddie, Lehman, Bear, and others like them, represents the failure of federal regulators to enact reforms in the $6.5 trillion mortgage securities market, an industry far bigger than the United States treasury market.
This Administration has put extra efforts against us to block action and intervention.
The Administration along with the ‘old boys’ in Congress are responsible for this crisis. They knew in advance. They said nothing. John McCain and Phil Gramm, his economic advisor, are each culpable. They have enthusiastically dredged regulatory favoritism to Wall Street, Enron et al.
Warned more than two years ago, McCain has colluded in an ideological foolishness that has slapped this country silly. William Black — former deputy director of the Federal Savings and Loan Insurance Corporation during the “Keating Five” scandal that nearly ended McCain’s political career — says the Arizona Republican’s chief errors at the time were underestimating the importance of regulation and relying too heavily on slanted advice from captains of industry …he took his advice from the worst [kind of] criminal.
In March 2007! Obama Called on Paulson & Bernanke to Address Economic Crisis