http://www.nypost.com/p/news/opinion/opedcolumnists/bubba_the_housing_bubble_8cUhYsqNdXVlWjflbbjiUO
Bubba & the housing bubble
By CHARLES GASPARINO
Last Updated: 1:03 AM, September 5, 2012
Posted: 10:47 PM, September 4, 2012
Bill Clinton’s Democratic Convention speech tonight will no doubt be loaded with references to his great economic achievements as president, plus warnings that a vote for Mitt Romney will be a vote to return to the economic disaster of the Bush era.
In other words, Clinton won’t mention a whole bunch of inconvenient facts — about what brought the prosperity of the 1990s, and how he himself helped put America on the path to the 2008 financial crisis.
He’ll tell us that a vote for President Obama will bring back the glory days of the 1990s — but those days weren’t so great until Republicans won control of Congress in the 1994 elections. That’s when Clinton turned right, and joined the GOP to put a hold on spending and lower taxes — allowing the technology boom to sustain the US economy through the Clinton years.
It’s an absurd distortion of reality that the Bush-era tax cuts or spending on Iraq were even remotely responsible for the 2008 banking collapse and the Great Recession — though both claims are now core to the left’s talking points in defense of President Obama’s failures as president (and largely unchallenged by a sympathetic media).
Yet the reality of what caused the banking collapse has the fingerprints of tonight’s keynote speaker all over it. Consider two Bubba boo-boos that trace straight to the housing bubble and the 2008 financial crisis.
The first is his obsession with pushing homeownership to new highs via government coercion. The second is his unleashing of Wall Street risk-taking.
Clinton charged his Housing secretaries, Henry Cisneros and Andrew Cuomo, with driving homeownership rates up to about 70 percent of households from around 64 percent in the early ’90s.
How did they do this? Through rigorous enforcement of housing mandates such as theCommunity Reinvestment Act, and by prodding mortgage giants Fannie Mae and Freddie Mac to make loans to people with lower credit scores (and to buy loans that had been made by banks and, later, “innovators” like Countrywide).
The Housing Department was Fannie and Freddie’s top regulator — and under Cuomo the mortgage giants were forced to start ramping up programs to issue more subprime loans to the riskiest of borrowers.
We know how that turned out: Fannie and Freddie help stoke a housing bubble that actually made homeownership less affordable unless borrowers took out ever-more-risky loans. Eventually, both agencies imploded (along with the housing market); bailing them out since 2008 has already cost taxpayers more than $100 billion.
(And, yes, Bush continued Clinton’s policies — but did try to rein in Fannie and Freddie in his later years, before the meltdown. But Democratic barons in Congress like Rep. Barney Frank balked at stopping the train before the wreck.)
You can also blame Clinton for helping usher in an era of wild risk-taking that led to the 2008 banking debacle. As president, he put the final nail in the coffin of the Depression-era Glass-Steagall Act — which for decades had separated Wall Street risk-taking activities from traditional commercial banking, such as taking deposits and small-business lending.
To be sure, ending Glass-Steagall was a bipartisan folly, but Clinton was fully on board. He killed it at the advice of then-Treasury Secretary Robert Rubin — a Goldman Sachs alum who went to work for the biggest beneficiary of Glass-Steagall’s demise, mega bank Citigroup.
Citigroup soon took risk-taking to new levels, obliging other banks to follow its lead — and in the end it crashed and burned like the rest of the banking business. (Indeed, Citigroup’s taxpayer bailout was far more generous than its rivals’, because the size of its risk-taking gone bad was far more dangerous to the financial system.)
So, yes, Bush deserves some blame for what happened in 2008 and the Great Recession. He left in place much of what his predecessor had done — but the crisis had nothing to do with tax cuts or Iraq.
Keep that in mind when Bill Clinton offers up his distorted alternate view of reality tonight.
Charles Gasparino is a Fox Business Network senior correspondent.
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