No, Bush isn't at fault for the subprime crisis

I'm still waiting for Dean Baker's blog entry on why the risk of a credit crunch means that we should start importing more white collar professionals now. But in the mean time, enjoy this, from the New York Times leader column:

More than 20 percent of global private debt securities is now tied to housing in the United States. That works out to $7.5 trillion — far larger than the market for United States Treasuries. So if America’s mortgage market heads south, the losses could be widespread.
The odds of a global financial crisis are still low, according to Mr. Zandi and Mr. Licari, but they are rising. There is not a lot now that can be done about the risks in the mortgage market. But the growing possibility of hard times ahead is another argument for rolling back many of the recent excessive tax cuts, so the government will have more resources available to respond if a crisis comes.

Of course, the Times doesn't mention that an enormous chunk of that $7.5 trillion is made up of agency bonds from Fannie & Freddie, which are simply not at risk. Why be honest when you're taking a running jump at an anti-Bush punchline? Bush has not been a great president, but I don't think you can blame lax lending standards in the subprime mortgage market on him. Hell, thanks to his fiscal policy, interest rates are probably higher than they would otherwise be.

Posted by Felix at 16:55 EST

Comments

hmmmm, I'm not sure how I'm implicated with this NYT criticism of Bush's tax cuts, but I have always been a non-partisan critic of bubble promoters. I was every bit as critical of the Clinton crew for failing to take the stock bubble seriously as I have been of Bush on the housing bubble. In both cases, i put most of the blame on the Fed.

And, of course, it is ALWAYS a good time to import more white collar professionals.

Posted by: Dean Baker at 0:56 EST, February 23, 2007