1 & 2 BARNEY FRANK (D) AND CHRISTOPHER DODD (D)
Frank is head of the House Financial Services committee and Dodd is chairman of the Senate Banking Committee.
These two men used their substantial power to press banks to make subprime loans to lower income people. The result was that people got mortgages who could not afford them. This led to a massive default rate and the mortgage meltdown that started the dip that led to the recession.
Are you doing a low-income person a favor if you saddle him with a huge debt that he cannot pay? Of course not. As a Christian my heart breaks for the poor people badly hurt by these loans. Frank and Dodd ought to be ashamed. They acted like they were helping but they were hurting.
Subprime loans are made at interest rates below the rates the market dictates. This is one more instance where the poor would be better off if markets where not interfered with and government intervention had not happened. (I am not saying government should never interfere – just that it interferes too much.)
Much of the pressure for banks to make subprime loans came through Freddie Mac and Fannie Mae, two private financial institutions with government backing. Their irresponsibility was seen for many years prior to the recession. In 2002 and again in 2003 the Bush White House tried to get legislation for greater regulation of these two entities. Both times the regulation was blocked by Democrats. Again in 2006 they tried. This time Republicans got the bill out of committee but did not have the votes to pass it on the floor. Fannie and Freddie went recklessly on. For more on this, watch the video.
3 & 4 GEORGE BUSH (R) AND HENRY PAULSON (R)
The mortgage problem was serious and should have caused a dip on or economy. But our economy was strong and this should have been nothing more than a dip. BUT enter George Bush and Henry Paulson.
Bush did the one thing a leader should never do. He panicked. He said things like “… our entire country is in danger.” Paulson persuaded Bush that disaster was looming if he did not do something. Bush passed bailout dollars for banks, Fannie Mae, Freddie Mac, AIG and car makers. At this point we can say that these measures did not help. Government spending seldom does.
The public observed this desperate behavior and followed the administration into panic. It is no surprise that the recession followed.
FINAL THOUGHT: Okay I admit it. It is a little over the top to blame the recession on just four men. But it is not exaggeration to say that these four men played a huge role in what followed..
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