Bush Housing Crisis Policy — The Early Years

Bush Housing Crisis -- The Early Years 

After his appointment to the presidency by his father’s Supreme Court (kinda the way he always got jobs), President George W. Bush thought about the economy, and recalled waking from a nap in Business School and hearing that “they aren’t making real estate anymore, heh-heh.” He decided that housing would be a top priority of his administration. Housing business, anyway.

Economic whiz and fellow patriot Senator Phil Gramm (R-TX) had just composted the Glass-Steagall Act (before leaving U.S. government to work for Union des Banques Suisse, un établissement financier mondial). What could the President do besides hire Dr. Wendy Gramm (future Enron boardmember) on to the White House staff to help slash those pesky regulations?

When the latest Wall Street bubble burst, the smart money left stocks and bonds and bought up real estate. The smarter money bought up mortgages, then bundled, mashed, and sliced them, selling the slabs as securities. The securities sold like hotcakes, mooncakes, schnitzel, sushi, and tahini; they were gobbled up by investors, banks, funds and governments worldwide. Debt as our greatest U.S. export! The mortgage debts of Americans, held by investors around the world. Free Trade at its finest!

Mortgage bundlers faced one problem: a mortgage shortage. The business solution: allow “exotic” mortgages (“Interest-Only Except on Thursdays”). The ultimate, quintessentially Republican solution: “deregulation by default;” just ignore existing laws. After all, President Bush gets to decide which laws passed by Congress he will obey, so that should be okay for the rest of us, mortgage lenders included.

Thus was born the greatest spurt in illusory financial gain in American history. Ford assembly lines might be idle, but mortgages were churned out like Model Ts and careening down the highway of speculation. Millions of honest renters achieved the Great American Pipe-Dream of home ownership, signing away their futures to pay prices they could not afford for dwellings they didn’t need at terms they couldn’t understand, thinking they were investing in their pathetic little futures.

The mortgage pipeline was at full spurt again, and the rushing torrent of dream-based debt was bundled and securitized. And the President smiled.

Next installment: Intimations of Insolvency— Who Will Tell the President In Words He Can Comprehend?

 

Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com

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One Response to “Bush Housing Crisis Policy — The Early Years”

  1. Bush Housing Crisis Policy, 2 — Intimations of Insolvency « NotionsCapital Says:

    […] Continued from Bush Housing Crisis Policy — the Early Years […]

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