“I’m mad as hell, and I”m not going to take it anymore.”
Peter Finch as Howard Beale “Network” 1976
If you’re not mad as hell, you’re not paying attention. And even those of you who are mad as hell, too many of you are mad at the wrong people for the wrong reasons.
Let me illustrate. Wednesday afternoon I went to school to pick up my daughter. I was waiting on the school lawn with all of the moms and the subject of the credit crisis came up.
One of the moms, whom I know well and whom I will call “Sarah”, offered this piece of wisdom. She said, “Well, I’ve never voted Democrat in my life but George Bush has just screwed everything up with his emphasis on deregulation and I just think it’s time for a change.”
Sarah, for crying out loud. We’re in the worst tight spot in generations and all you can manage is to spout the vacuous talking points of a political campaign? This is serious stuff, Sarah and you, and every other American, need to understand it so that it won’t happen again.
History will have the last word on George W. Bush and I suspect it won’t be nearly as harsh an assessment as what’s out there now. But be that as it may, his performance in office was far from perfect and he deserves criticism on a number of fronts. But if you’re going to go after him, at least go after him on issues that he screwed up. This credit meltdown isn’t one of them.
Just as a reminder, Sarah, George W. Bush signed the bill that has come to be known as “Sarbanes-Oxley,” arguably the most onerous financial regulation statute in the free world and one that threatens New York with ceding its supremacy as a financial center to friendlier venues such as London. No CFO or CEO of a publicly traded company thinks that George W. Bush went easy on regulation. They hate Sarbanes-Oxley and they hate it for good reason. Sarbanes-Oxley was a gross overreaction to the collapse of Enron and Worldcom in late 2001 and 2002.
Curiously, little of Sarbanes-Oxley applies to the Government Sponsored Enterprises that we have come to know as Fannie Mae and Freddie Mac. The crisis these mortgage behemoths have helped cause makes Enron and Worldcom look like pocket change.
If you want to be mad, Sarah, be mad at the liberal do-good public policy that led Fannie and Freddie to overstep in the first place. Fannie and Freddie, in addition to their other functions, acted as the outlet for hundreds of thousands of loans made as a result of the Community Reinvestment Act. This legislation was signed by Jimmy Carter in 1977 and serves to coerce banks to make loans in poor neighborhoods to poor credit risks. It was passed as a result of the apparent belief that bankers are reluctant to loan money in poor neighborhoods not because they are concerned about getting paid back but because they are all a bunch of bigots.
Bill Clinton doubled-down on the Community Reinvestment Act in 1995 and pushed Fannie and Freddie to buy more of what we now call “sub-prime” mortgages.
When a sufficient number of those loans went bad, as they were destined to do, we wound up with the mess we’re in now and the vain hope that the federal government can fix it all by writing a bunch of huge checks that, in all honesty, it can’t cash.
And, Sarah, as long as you’re going to be P-O’ed, save some anger for the two learned gentlemen of the Senate who both want to be your president. One of them is blaming George Bush and the “failed polices of the last eight years.” The other is proposing to spend $300 billion of your money saving people from the mortgage loans they should have never taken out.
If John McCain can’t take the culpability of two Democrat administrations and the Democrats who stood in the way of bringing Fannie and Freddie under Sarbanes-Oxley-type oversight in 2004 when they first got in trouble, and turn that all to his advantage, he will lose the election and frankly, deserves to.
As I’m writing this on Thursday afternoon, the market just closed down another 678 points.
Your retirement is in serious jeopardy, Sarah. Be good and mad. But be sure your anger is informed. We need you.