Opponents and supporters alike have tried to put some context on Bush's responsibility for the mortgage mess that has turned into a full out economic crisis. The latest foray into this analysis is this piece from the New York Times in which all the blame was place on the Bush administration for the entire crisis. That is far too simplistic. Yet, there is no doubt that as President, Bush deserves plenty of blame for what is happening. The question is how much and for what.
From my perch inside the industry, here is how I see his role in this crisis. I think all of us remember that one of the themes of Bush's first term was the so called Ownership Society. In fact, for years Bush touted that under his administration there was record home ownership. For about three years, this became an integral mantra of Bush's domestic policy.
Those within the industry knew the dirty little secret of the "record home ownership". It was being created by marginal loans and many of these loans were fraudulent. The reason there was record home ownership was because fraud was being created on a scale not seen before in the industry's history. In other words, on an unprecedented scale there was fraud on mortgage loan applications that lead to an unprecedented level of fraudulent loans. These fraudulent loans became a part of mortgage bonds and filtered their way through many different investment vehicles.
Now, we'll never know why the Bush administration turned a blind eye to the wholesale fraud committed on their watch, and ultimately it doesn't matter. Whether they simply didn't recognize it, or they simply didn't want to know it was going on, doesn't actually matter. The results speak for themselves. Personally, I don't think it is merely a coincidence that Bush touted the ownership society as it was being created by fraud. I think that the Bush administration didn't want to know how this was happening. I think that because there has always been a certain level of fraud in the industry they simply assumed this was a natural part of the business.
Either way, Bush is responsible for not aggressively confronting the fraud. Routinely loans had lies regarding income, assets, and occupancy. It became an epidemic and that epidemic is now biting everyone. This epidemic could have easily been confronted if Bush had the will and the motivation. Either Justice, HUD, the SEC, or any number of other agencies, could have made any one loan an example. At any time, anyone could have found fraud anywhere and made a grandstanding gesture against that loan. Everyone involved could have been prosecuted and the administration would have had the bully pulpit of the media to make the case that the Bush administration would no longer accept wholesale fraud in the industry.
That loans were being done largely through wholesale fraud became an open secret. If the Bush administration didn't know it, that is unacceptable. If they did know it and did nothing that is no less acceptable. That they didn't do anything about it is their responsibility for the mortgage crisis that is now eating away at our economy. That is their role in this crisis.
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