'How did we get here?': The White House responds

Calling Sunday's story "White House Philosophy Stoked on Mortgage Bonfire" on the housing crisis "irresponsible reporting by the New York Times," White House Press Secretary Dana Perino released this statement today:

Most people can accept that a news story recounting recent events will be reliant on "20-20 hindsight." Today's front-page New York Times story relies on hindsight with blinders on and one eye closed. 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. To prove the point, when they filed their story, NYT reporters were completely unfamiliar with the President's prime time address to the Nation where he laid out in detail all of the causes of the housing and financial crises.

Among "the three most egregious claims" is one I touched on in Sunday's L.A. Land blog post:

The New York Times wrongly accuses President Bush and his Administration of disregarding signs of danger from Government Sponsored Enterprises (GSEs) and ignores the President's prime time address to the Nation where he laid out in detail all of the causes of the housing and financial crises, arguing that "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." (Jo Becker, Sheryl Gay Stolberg, Stephen Labaton, "White House Philosophy Stoked On Mortgage Bonfire," New York Times, 12/21/08)

The New York Times completely ignores the fact that while the Administration was pushing for more transparent lending rules and reining in Fannie Mae and Freddie Mac, Congress had for years blocked attempts at stronger regulation and blocked reform of the Federal Housing Administration.

--House Financial Services Committee Chairman Barney Frank (D-MA) criticized the President's warning saying: "these two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis.... The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." (Stephen Labaton, "New Agency Proposed To Oversee Freddie Mac And Fannie Mae," New York Times, 9/11/03)
--Senate Committee on Banking, Housing and Urban Affairs Chairman Christopher Dodd also ignored the President's warnings and called on him to "immediately reconsider his ill-advised" position.

Over the past six years, the President and his Administration have not only warned of the systemic consequences of failure to reform GSEs but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform at least 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems. Many prominent Democrats, including House Finance Chairman Barney Frank, opposed any legislation correcting the risks posed by GSEs.

Since this story has received a lot of comments here at L.A. Land, including some faulting the journalism and tiring of blaming the administration, I thought some of you might be interested in the government's response.

-- Lauren Beale

Thoughts? Comments? 

Photo: White House Press Secretary Dana Perino. Credit: Ron Edmonds / Associated Press

Comments

[el pez]

thank you for posting their response.

interesting- even now the much-maligned bush admin is being (in my opinion) too nice. click on the link to the egregrious claims link and you will see a mention of donations to democratic leadership... they graciously left off number 2 on the all-time list- barack obama at $126,349 (http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html)- all in what- two+ years? ooh it's messy.

politics aside... like many other commenters on here i'd like to see the feds get out of this one- i have a feeling they are a lot of the reason we're in this mess in the first place.

[Raul Garcia]

The fact Paulson is still in charge speaks volumes of Bush's capabilities.

[Robert Laughing]

It's been AGES since I had any respect for any of the 'mouth organs' in the White House...this LADY, IS ONE of the BEST, a real professional....I don't see a whole lot of political spin meister/ framing in her answers ....but, now, she looks to be UNdoing her credibility. Dems didn't get any power in Congress until the Nation was disgusted with her 'finger puppet of Wall Street ' and his NeoCons, and changed Congress in Nov 2006 elections. True, Blarney Frank is reprehensible.. can't spin that any other way. But, Wall Street money, created ALL the fraudulent PRODUCTS that MADE the housing crisis.

[Figgins]

I think the root cause for the foreclosure mess goes all the way back to when banks stopped using their own deposits to fund home loans. As soon as the banks became mortgage brokers they made a 180° turn from Risk Averse. Now the banks look only to making the next loan and getting those loan fees.

If the banks have to back their loans, we will return to sane lending practices.

Will this prevent more foreclosures in the next 12 months? No. Will this prevent a mortgage meltdown 10 years from now? Yes.

[Adam]

"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."

Sounds like Bush Administrative reporting on Iraqi weapons of mass destruction and the many reasons we needed to commit to fuelling the Federal Youth Bonfire going on in Iraq and Afghanistan with our children.

She must've been so insensed. I know I was.

P.S.: Is it me, or does this image of Dana Perino's face describe a black eye? Good grief.

[Ann A Conda]

Read it for yourself. The NYtimes ariticle makes it clear that the government had the warning about the GSEs insolvency and the power to take them over much sooner, but Lockhart, Bush's regulator, and Paulson didn't want to rock the boat. They kept hoping things would get better.

Also they can blame Barney Frank for the lack of regulation as much as they like, Bush fired the good regulator, Falcon, in 2005 and ignored the warnings of doom in 2007.

Through inattention and/or wishful thinking Bush sealed his fate: worst economic crisis since the great depression and an unnecessary war to top it off.

In spite of his "good" intentions, history will not be kind to Bush. The Bush press secretary's pronouncements are chaff in the wind.

[Fred Harwell]

It's going to be fun watching fish-wrap like The NEW YORK TIMES and the LA TIMES fidget and turn in the wind when the democRATS are in full power. WHO will they then blame for everything? Surely not your big man Obama. Maybe the Ghost of Bushes past? haha

Frank and Dodd and their idiotic democRAT idea that ANYBODY who walks up gets a house loan whether they can afford to pay it back or or not are responsible for this mess , with heavy emphasis on Frank.

Barnie Frank should go to jail for the rest of his natural life. He and ANYBODY else who went around pressuring banks to depart from business-like practice so we could all feeeeeeeeel goooooooooood about issuing housing loans to "under-priveleged" Americans.

Folks, I bought a little house in 1965 for $13,650 for 4.75% interest. They asked me a lot of questions. I felt like they had looked into my intestines from the exit. We paid it off while raising a family in it and my wife and I still live there and will, GOD willing, until we pass. I recommment living within your means whom ever you are and not listening to touchie feeeeeelies....like Barney Frank.

[Larry Linn]

Back in July, Bush said "I think the system basically is sound, I truly do, and I understand there's a lot of nervousness. . . . But the economy is growing, productivity is high, trade is up, people are working."
Case closed!

[Mkoch]

Absolutely - how dare we hold the Bush administration responsible for anything bad that's occurred over the past eight years? Surely we can find a quote from some Democrat somewhere at some point in time that proves that all these events are their fault and not the Republicans?

The Bush administration has been held hostage for eight years by the minority Democrats (and the Clintons!) who tricked the administration into cherry picking intelligence and blundering into two mismanaged wars, created the Enron crisis and then refused to allow the Republicans from enacting legislation to prevent similar, Ponzi scheme-like debacles.

It's only a coincidence (or a clever frame!) that allowed Republican donors to profit massively for eight years on this elaborate con game.

Really, it's not their fault. They had no means to combat the mighty powers of Barney Frank. They had no choice but to obey his commands.

Oh, if only complete control of the executive, legislative and judicial branches really granted any power! Then Republicans could prove that their ideology of less government oversight and fewer regulations on those in power is actually superior!

[Don Taylor]

http://www.youtube.com/watch?v=GMo7T9t0Gzk

How the Bush Administration Stopped the States From Stepping In to Help Consumers
By Eliot Spitzer
Thursday, February 14, 2008;Page A25

Several years ago, state attorneys general and others involved inconsumer protection began to notice a marked increase in a range ofpredatory lending practices by mortgage lenders. Some weremisrepresenting the terms of loans, making loans without regard toconsumers' ability to repay, making loans with deceptive "teaser" ratesthat later ballooned astronomically, packing loans with undisclosedcharges and fees, or even paying illegal kickbacks. These and otherpractices, we noticed, were having a devastating effect on home buyers.In addition, the widespread nature of these practices, if leftunchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, theBush administration looked the other way and did nothing to protectAmerican homeowners. In fact, the government chose instead to alignitself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New Yorkattorney general, I joined with colleagues in the other 49 states inattempting to fill the void left by the federal government.Individually, and together, state attorneys general of both partiesbrought litigation or entered into settlements with many subprimelenders that were engaged in predatory lending practices. Several statelegislatures, including New York's, enacted laws aimed at curbing suchpractices.

What did the Bush administration do in response? Did it reversecourse and decide to take action to halt this burgeoning scourge? AsAmericans are now painfully aware, with hundreds of thousands ofhomeowners facing foreclosure and our markets reeling, the answer is aresounding no.

Not only did the Bush administration do nothing to protectconsumers, it embarked on an aggressive and unprecedented campaign toprevent states from protecting their residents from the very problemsto which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency(OCC). The OCC has been in existence since the Civil War. Its missionis to ensure the fiscal soundness of national banks. For 140 years, theOCC examined the books of national banks to make sure they werebalanced, an important but uncontroversial function. But a few yearsago, for the first time in its history, the OCC was used as a toolagainst consumers.

In 2003, during the height of the predatory lending crisis, the OCCinvoked a clause from the 1863 National Bank Act to issue formalopinions preempting all state predatory lending laws, thereby renderingthem inoperative. The OCC also promulgated new rules that preventedstates from enforcing any of their own consumer protection laws againstnational banks. The federal government's actions were so egregious andso unprecedented that all 50 state attorneys general, and all 50 statebanking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or evenslow, the Bush administration in its goal of protecting the banks. Infact, when my office opened an investigation of possible discriminationin mortgage lending by a number of banks, the OCC filed a federallawsuit to stop the investigation.

Throughout our battles with the OCC and the banks, the mantra of thebanks and their defenders was that efforts to curb predatory lendingwould deny access to credit to the very consumers the states weretrying to protect. But the curbs we sought on predatory and unfairlending would have in no way jeopardized access to the legitimatecredit market for appropriately priced loans. Instead, they would havestopped the scourge of predatory lending practices that have resultedin countless thousands of consumers losing their homes and put oureconomy in a precarious position.

When history tells the story of the subprime lending crisis andrecounts its devastating effects on the lives of so many innocenthomeowners, the Bush administration will not be judged favorably. Thetale is still unfolding, but when the dust settles, it will be judgedas a willing accomplice to the lenders who went to any lengths in theirquest for profits. So willing, in fact, that it used the power of thefederal government in an unprecedented assault on state legislatures,as well as on state attorneys general and anyone else on the side ofconsumers.

[ToadB]

Oh please. The Bush administration has been only the most corrupt, cynical and vile one in US history. The saddest thing is that some of the very people who are royally rogered by Bush and his merry band of cronies are the ones who weep for their demise.

[Doug in Toronto]

Methinks the lady doth protest too much.

[el pez]

i think it would behoove some of you to separate your view of the wars in iraq and afghanistan from the actual discussion at hand. you can blame all of our national woes on the white house if you like, but the white house only has so much control and so much power over the economy. congress has probably an equal amount of power (and a lot of politics deciding how it all gets divided up and done), the fed has some, but our economy principally lies in our hands- we make decisions, we sign papers, we borrow money, we pay it back, we take risks, we buy a lot of stuff that we can't really afford, etc etc.

no one is twisting anyone's arms to buy a property. but sure go ahead and blame everything on bush- i'm sure there's a lot of general grievances you may have that the bogeyman can be blamed for. it's always really convenient and easy to do that so why not? maybe we can blame bush for the lakers not playing so well the last few games while we're at it? in my opinion bush probably couldn't force the issue with fannie and freddie back in '03 as much as he would have liked because he wanted and needed backing for foreign policy decisions- that's how things are done.

wake me up when this thing gets as bad as i remember from 79-82. oh yeah before most people had vcr's and many still used rotary phones and we didn't have incredible computers in each of our houses and all of that... gas lines in the preceding years and whatnot... 18% nominal interest rates and much higher unemployment than now... there might be major problems in the financial sector, but i don't see a whole lot that reminds me of those years when i look at the nation over all... yet. our economy is fundamentally ok, but a lot of people (and banks) who made bad decisions will unfortunately have to pay for those decisions, and they will make things difficult for the rest of us as well. housing will also get a lot more affordable here in la and a lot of us who read this blog are very happy about that, myself included.

good luck with the next guy! just do all of us a favor and don't blame him for every little thing or give him too mich credit as well. it's on us folks, not them.

here's a neat thing to do: google 'los angeles housing bubble' and the first thing that pops up is an article from the ny times from dec. 8, 1984 called THE DAY LOS ANGELES'S BUBBLE BURST...

perhaps we can all take a little responsibility for ourselves. if we had done so collectively we would not be in the pickle we are in. oh but i forgot- the government is going to save you. you might get more than you bargained for (or a lot less) with that idea... one can review history for that as well.

[plankbob]

It's the American public who had blinders on when they voted twice for Bush. Lies and more Bush lies in the attempt to rewrite history is what we can expect. Can't wait to see the new exhibits in the Bush Liebury.

[Stuart Moisen]

not one word in the nyt's front page editorial about jimmy carter, his community reinvestment act, bill clinton and his mandate to freddie/fannie to give loans to every crack cocaine dealer in south chicago, barney frank (who was touting freddie/fannie stock as late as 6 months ago), christopher dodd, chuck shumer, f. raines, etc etc etc. to say it was the democrats who got us into this mess is an understatement.

it is still amazing to me that raines and his fellow democrats cooked the books at fannie and did not go to jail.

[Mucker]

I like the part where she points out :

"as early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated".

So it seems that at the same time they were noting the problem they were ignoring it. Shouldn't the top advisers be pushing hard to act on the warnings if that's what the article claims?

On an off topic but related (to the machinations of GWB) isn't it ironic that they did not have this response to media reports of their lies and actions to lead the nation into war in Iraq?

[srla]

It's indicative of the low regard with which the Bush administration holds the media (and the public) that they cite having warned of impending problems in 2006 - the very year the housing bubble burst Wow, they actually spotted the fire once it was raging. That's foresight! The problem was evident to many of us 3-4 years earlier, and anyone with basic graph reading skills should have been able to spot the stark deviation from 100 year trend levels at that point.

I hold both parties equally to blame for the current fiasco, but I also see that the attempt by Republicans to somehow blame the mess on Barney Frank and Dodd is beyond ludicrous. While lax regulation at Freddie and Fannie helped push the bubble higher, it was only one of many such factors. Were Bush to have had any inclination at all to help moderate bubble pricing during the REAL bubble years (2000-2005), he could have simply made comments to the effect that housing prices were overinflated. This would have been the most powerful way to contain prices. Of course, instead he joined in the chorus of denials that a bubble even existed, as did Dodd, Frank, and everyone else.

Of course, the bubble was already so obvious by early 2005 that anyone who still missed it by that point should be permanently disregarded by a competent media. Instead, we still have Lawrence Yun and other similar so-called "economists" (read: Real Estate PR hacks) serving as the primary source in national media stories on housing prices - http://money.cnn.com/2008/12/23/real_estate/home_sales_November/index.htm. This is unbelievable incompetence. No wonder much of the media is on death's door.

[Mucker]

"Wall Street money, created ALL the fraudulent PRODUCTS that MADE the housing crisis.

Posted by: Robert Laughing "
and as Stuart Moisen as well as Don Taylor point out it was the actions of Dems and Repubs, that deregulated to allow it to happen. It is politics as usual folks. The corporate powers in this country buying the govt influence to rob rape and pillage Americans. Hey, a little distraction like the war in Iraq (and Afganistan) make it easier. Read the book "The Politics of War".

[Tim K.]

I agree with El Pez - this is nowhere near as bad as the 80's. If you think this is an economic disaster you're a real wimp.

The ONLY thing that is unusual about this situation is the degree that housing prices went up. And so they will go back down. That's not a disaster. It's welcome relief and way overdue.

For most of America, this should be a time of celebration. The implosion of housing prices shows that sound economic fundamentals STILL WORK. Markets are functioning. Ridiculous credit is being reigned in to normal levels. Sanity is returning. We even have a president-elect who seems to approach the intelligence of what we expect from someone in the highest office on the land.

There are *great* times. Sure, the fraudsters are hurting, but they deserve it. I, for one, have never felt more optimistic about the next decade.

[syscom3]

plankbob, did you also mean to include all of the senators and representatives that looked the other way when it came time for oversight?

I find it amusing that the Senator Dodd was in charge of the senate finance commitee during the S&L debacle. Now he is in the very same position during this recent collapse. He has a black cloud following him everywhere he goes!

[Ron]

glad the commenters here helped me figure out who's to blame for this one. who knew that Barney Frank was smart enough to pull one over on ALL the Republicans, especially the entire U.S. Treasury and Federal Reserve. I'm now convinced that the neocons love of regulating corporate America might thwart the Obama administrations attempts to remove any remaining regulation over the finance and insurance industries, the oil and power companies, and the like. hell, from what I have been hearing over the past couple of months from the right-wingers, I'll soon learn they've been pushing universal health care for decades.

[MyLessThanPrimeBeef]

The word 'aporia' as used by semioticians comes to mind when one reads a discussion like this one.

And that's why I try to stay from them.

[StillaLaTimesreader]

Why are we playing blame game? We (Americans)benefited from the greatest ponzi scheme and lived like royalties for the past few years on the backs of the rest of the world. We should be grateful that others were so gullible in buying our mortgage securities and toxic products and hence increasing our "wealth". Americans live an entitled lifestyle that even now can only be sustained by borrowing trillions of dollars. But who cares? We will let the future generation pay for it.

[el pez]

i still think some of the commenters are going nutso with the politics number... all of em have blood on their hands with this one, but there is a lot of politics involved in the whole thing. mostly we have blood on our hands more than any "them" out there... blame your neighbors instead.

please recall that bush took office exactly when the tech bubble (we really don't learn right?) burst (can't blame that one on him). it was really a bad slowdown then bam 9/11 hits. the fed started dramatically lowering interest rates at that point to keep a big recession from happening and housing started going off like a rocket. then people got hip to the capital gains laws changes and that made the flipping phenomenon have more fire underneath it. then just about everyone i know lost their minds and refused to think about actual fundamentals in housing markets (an almost world-wide phenomena btw). before all of this dems had pushed for years for relaxed lending in the lower end and bush, the compassionate conservative, was pretty on board with that, but also saw that FF and FM were a bit out of control, but what could he do? he needed congressional support for his things, they bargain, that's how things work in washington and pretty much everywhere else.

now that long gamble by the fed has blown up, but i would argue that it worked pretty well for a long time... only problem is that most of us got really stupid and bankers got incredibly stupid. let 'em feel the pain, and feel it deep so they aren't so stupid next time. and blame everyone in washington, not just bush.

no one really controls the fed- they are simply appointed and are independent. bush kept the same guy that clinton had appointed (and obama is keeping pretty much the same type of folks that bush had). keep the "neo-con" rants to foreign policy. don't confuse all of this stuff and make it so political. if the fed had jacked up rates a few years ago who knows what would have happened.

i think we will do better when we stop basing our economy on bubbles. i don't think the government can really engineer that one- it's up to us. whenever they try to engineer stuff (like securitizing mortgages and getting them AAA rated) it tends to not work out so well, sort of like protectionist policies and all sorts of things. and maybe a dragon that needed to be slayed has been slayed- the investment bank. fundamentals not bubbles!

[TrojanDLA]

Oh come on, it's obvious that politicians ON BOTH SIDES were turning a blind eye to the risks because in 2005 the economy was HUMMING at a great pace and the stock market was flying high and everybody was making money in real estate.

Does anybody honestly think that a Dem/Republican President/Congressman would publicly state,"Hold your horses, this economic boon is completely bogus. Everybody, we are 3 years away from the complete meltdown of the economy!!" Guess what? A few economists tried that and were universally plastered as a bunch of chicken-little.

Seriously now, there was no way anybody would have had the guts to publicly address the nation that all this money was nothing more than a house of cards and it's time to regulate the banks. With Wall Street making insane amounts of money and giving it away to lobbyists and politicians, you think those bills would've gotten anywhere?

Wake up - this collapse was unavoidable due to the very human instinct of turning a blind eye to bad news when times are good.