Tag Archives: Bush

Down the Rabbit Hole

Rather often I feel like listening to the Republicans is like living in Alice’s wonderland. Here are some examples:

Who created more debt Bush or Obama?

The opiate truth: Obama increased the national debt vastly more than any other president.

The non-opiate truth:

The Graph – Center on Budget and Policy Priorities is non-partisan.

Here are the latest absolute numbers on the debt increase between President Bush and President Obama:

Bush debt increase: 85%

Obama debt increase: 44%

From January 20, 2001 to January 20, 2009 the national debt increased from $5,727,776,738,304.64 to $10,626,877,048,913.08. For those that still believe in arithmetic this is an 85% increase in the debt over the Bush administration’s term ((10,626,877,048,913.08 / 5,727,776,738,304.64) * 100) = 185% or an 85% increase).

From January 20, 2009 to February 3, 2012 the national debt increased from $10,626,877,048,913.08 to $15,330,778,119,850.60. This is a 44% increase in debt over President Obama’s term ((15,330,778,119,850.60 / 10,626,877,048,913.08) * 100) = 143% or a 43% increase).

Don’t take my word for it, check it out on the US Treasury Department site.

Additionally, there is the discretionary and non-discretionary part of the budget. Discretionary spending is annual spending that the congress and the president have to deal with every year; non-discretionary is mandatory, multiyear spending that has already been committed to by previous administrations (i.e., like food stamps calculated to poverty levels). The non-discretionary portion of the 2011 budget is 59%; the discretionary is 34% (reference).

What Republicans call Obama-Care has not kicked in yet but the GAO wrote a report that I have read from start to finish that claims it will take 100 billion off the budget over 10 years as compared to doing nothing (can’t cherry pick GAO reports in my opinion – ask my wife – she retired from the GAO). However, the 1 trillion dollars over 10 years of Medicare Part D that was passed by a Republican president (Bush) and Republican dominated House and Senate has already started to hit non-discretionary spending. The non-discretionary part of the budget makes up the lion’s share of the increased debt spending that you see at the end of the Bush administration. Part is this has to do with the wars, the national disasters (FEMA) and more importantly the recession. As more people go into poverty entitlements that were all previously linked to poverty numbers kick in with much higher amounts of spending – nothing to do with President Obama. This will be discussed more later in this essay.

Who created more unemployment Bush or Obama?

The opiate truth: Obama increased unemployment vastly more than any other president.

The non-opiate truth:

Bush increase in unemployment: 86%

Obama increase in unemployment: 6%

When Bush took office on January 20, 2001, the national unemployment rate was 4.2%. When he left office on January 20, 2009 and President Obama took office the national unemployment rate was 7.8%

The current unemployment rate as of January 6, 2012 is 8.3%

Doing the math, the increase during the Bush administration was (7.8 / 4.2) * 100 = 186% or a 86% increase in unemployment. For the Obama administration the math is (8.3 / 7.8) * 100 = 106% or a 6% increase in unemployment.

* Note: I have revised this based the January, 2009 unemployment number of 7.8%. President Obama took office January, 20, 2009. From the graph below you can see that the unemployment rate exploded just as he got into office. I think this explosion arguably was not due to anything President Obama did in his first few months (just 4 months later the rate was 9.4%) as the national unemployment rate does not turn on the dime but I will give the detractors the benefit of the doubt. There is still a huge difference in 86% (Bush) and 6% (Obama). If the numbers from 4 months after President Obama took office are used they work out to:

Bush administration increase in unemployment: 124%

Obama administration decrease in unemployment: 12%

Transition Date: End of May, 2009

Given this, the difference would be a 136% increase in unemployment during the Bush administration over the Obama administration.


How do Americans feel about abortion?

The opiate truth: The majority of Americans are against abortion.

The non-opiate truth:

Entitlement programs?

The opiate truth: Entitlement programs do not do anything but waste taxpayers money.

The non-opiate truth:

President Obama and food stamps?

The opiate truth: President Obama is the ‘food stamp president’.

The non-opiate truth:

Food stamps have been tied to poverty levels for decades. President Obama has nothing to do with the automatic levels that kicked in due to the recession that started in the Bush administration.

Additionally, many of the entitlement programs are tied by law to the poverty line and/or adjusted income.

Introduction to the Supplemental Security Income (SSI) Program

Interesting chart…

Even with all the additional expenses of non-discretionary entitlement programs kicking in during the Obama administration, the rate of increase of the national debt is still less that the Bush administration.

This is a graph of the debt since 1950 (click on the graphs to make them larger)…

This is the rate of increase of the debt since 1950…

Please note the difference from 2001 to 2009 and 2009 to 2011. This is Bush vs Obama

Note: The graph only uses full fiscal year data. The last fiscal year ended was September 30, 2011

Here is the data and links to the Treasury Department to verify the numbers…

The links shown above are:
Historical Debt Outstanding – Annual 2000 – 2010
Historical Debt Outstanding – Annual 1950 – 1999
The Debt to the Penny and Who Holds It
Debt Position and Activity Report
The Debt to the Penny and Who Holds It (type in Enter Beginning Date: 9/30/11)

Please, don’t vote and do drugs!

Federal Deficit and Debt – President Obama vs President Bush

If you look at these numbers you will see that the national debt has gone up every year since 1969 except the last four years of the Clinton administration budget:

Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public,

1968 to 2007, in Billions of Dollars

Sources: Congressional Budget Office; Office of Management and Budget.

Date         Deficit (-) or Surplus Debt Held by the Public

1968                 -25.2                             289.5

1969                 3.2                                278.1

1970                 -2.8                               283.2

1971                 -23.0                             303.0

1972                 -23.4                             322.4

1973                 -14.9                             340.9

1974                 -6.1                               343.7

1975                 -53.2                             394.7

1976                 -73.7                             477.4

1977                 -53.7                             549.1

1978                 -59.2                             607.1

1979                 -40.7                             640.3

1980                 -73.8                             711.9

1981                 -79.0                             789.4

1982                 -128.0                           924.6

1983                 -207.8                           1,137.3

1984                 -185.4                           1,307.0

1985                 -212.3                           1,507.3

1986                 -221.2                           1,740.6

1987                 -149.7                           1,889.8

1988                 -155.2                           2,051.6

1989                 -152.6                           2,190.7

1990                 -221.0                           2,411.6

1991                 -269.2                           2,689.0

1992                 -290.3                           2,999.7

1993                 -255.1                           3,248.4

1994                 -203.2                           3,433.1

1995                 -164.0                           3,604.4

1996                 -107.4                           3,734.1

1997                 -21.9                             3,772.3

1998                 69.3                              3,721.1

1999                 125.6                            3,632.4

2000                 236.2                            3,409.8

2001                 128.2                            3,319.6

2002                 -157.8                           3,540.4

2003                 -377.6                           3,913.4

2004                 -412.7                           4,295.5

2005                 -318.3                           4,592.2

2006                 -248.2                           4,829.0

2007                 -160.7                           5,035.1


Federal Debt Under President George W. Bush

President Bush started with 3.3196 trillion dollars of public debt.

He left his 8 years (6 years with control of both branches of Congress) with 7.8111 trillion dollars of public debt.

This means the public debt increased 4.4915 trillion dollars during his administration.

Federal Debt Under President Obama

Here are the numbers for the Obama administration projected out to 21014:

Year Gross Debt in Billions as % of GDP Debt Held By Public ($Billions) as % of GDP
2010 (2 Sept) 13,442.1 92.1 (2nd Q) 8,933.2 61.2 (2nd Q)
2010 (est.) 14,456.3 98.1 9,881.9 67.1
2011 (est.) 15,673.9 101.0 10,873.1 70.1
2012 (est.) 16,565.7 100.6 11,468.4 69.6
2013 (est.) 17,440.2 99.7 12,027.1 68.7
2014 (est.) 18,350.0 99.8 12,594.8 68.5

 This means the public debt is estimated to increase under the Obama administration by 4.7837 trillion dollars.


Wikipedia can be unreliable but I checked out the numbers before I posted the link.  The chart is a little simpler to read but here is the official US Treasury Department numbers:



Projected (est.) Congressional Budget Office numbers come from this report:


Republican’s commonly complain that the surplus was due to Republican control of the Congress.  However, they do not point out that President Clinton did not have full control of the Congress for six years as President Bush did.

The Republicans took control (not a super majority) of the US House of Representatives in 1994 not the Senate.


In 1995 the Republicans took control of the Senate as well (not a super majority).

“In the 1996, 1998, and 2000 elections, Republicans lost Congressional seats but still retained control of the House and, more narrowly, the Senate. After the 2000 election, the Senate was divided evenly between the parties, with Republicans retaining the right to organize the Senate due to the election of Dick Cheney as Vice President and ex officio presiding officer of the Senate. The Senate shifted to control by the Democrats (though they technically were the plurality party as they were one short of a majority) after GOP senator Jim Jeffords changed party registration to “Independent” in June 2001, but later returned to Republican control after the November 2002 elections. In the 2006 elections, Democrats won both the House of Representatives (233 Democrats, 202 Republicans) and the Senate (49 Democrats, 49 Republicans, and 2 Independents caucusing with the Democrats) as well as the majority of state governorships (28-22).”


The Republicans had full control of the Executive and Congressional branches of government for six years and could not generate a surplus.  However, President Clinton did it for four years without having full control.

Unemployment Statistics – President Obama vs President Bush


Unemployment Under President George W. Bush

The unemployment rate in 2000 was 4.0%

The unemployment rate in 2009 was 9.3%

The rate went from 4.0% to 7.7% under President Bush, 3.7% over his administration.


Unemployment Under President Obama

Current estimates are 9.6%

President Obama took office on January 20, 2009

In January 2009 the rate was 7.7%

It went from 7.7% to estimated 9.6% under President Obama, 1.9% under President Obama to date.

Series Id:           LNS14000000
Seasonally Adjusted
Series title:        (Seas) Unemployment Rate
Labor force status:  Unemployment rate
Type of data:        Percent or rate
Age:                 16 years and over

Top of Form


Bottom of Form

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 4.0 4.1 4.0 3.8 4.0 4.0 4.0 4.1 3.9 3.9 3.9 3.9  
2001 4.2 4.2 4.3 4.4 4.3 4.5 4.6 4.9 5.0 5.3 5.5 5.7  
2002 5.7 5.7 5.7 5.9 5.8 5.8 5.8 5.7 5.7 5.7 5.9 6.0  
2003 5.8 5.9 5.9 6.0 6.1 6.3 6.2 6.1 6.1 6.0 5.8 5.7  
2004 5.7 5.6 5.8 5.6 5.6 5.6 5.5 5.4 5.4 5.5 5.4 5.4  
2005 5.3 5.4 5.2 5.2 5.1 5.0 5.0 4.9 5.0 5.0 5.0 4.9  
2006 4.7 4.8 4.7 4.7 4.6 4.6 4.7 4.7 4.5 4.4 4.5 4.4  
2007 4.6 4.5 4.4 4.5 4.4 4.6 4.6 4.6 4.7 4.7 4.7 5.0  
2008 5.0 4.8 5.1 5.0 5.4 5.5 5.8 6.1 6.2 6.6 6.9 7.4  
2009 7.7 8.2 8.6 8.9 9.4 9.5 9.4 9.7 9.8 10.1 10.0 10.0  
2010 9.7 9.7 9.7 9.9 9.7 9.5 9.5 9.6 9.6        

http://www.bls.gov/webapps/legacy/cpsatab15.htm (need check U3 Seasonally Adjusted)

How George Bush and the Private Mortgage Market Created The Perfect Storm

This article is a factual examination of the historical causes for the economic collapse that began in 2006.

Here are some obvious facts about the economic crisis:

It occurred in 2006.  President Bush had been president for six years.  The Republicans had controlled both the Senate and the House for six years.

The last four years of the Clinton administration there was an annual budget surplus.  The last time this occurred was in 1969.[i]  It has not happened since.  To be fair, the Republicans took control of the House of Representatives in 1994.

Certainly, a significant event that started the collapse happened during the last few years of the Clinton administration.  The Gramm–Leach–Bliley Act of 1999, known as financial services deregulation,

repealed part of the Glass-Steagall Act of 1933, opening up the market among banking companies, securities companies and insurance companies. The Glass-Steagall Act prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.[ii]

The bill was a compromise between the Clinton Administration and the House Republicans:

The bill then moved to a joint conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act and address certain privacy concerns; the conference committee then finished its work by the beginning of November. On November 4, the final bill resolving the differences was passed by the Senate 90-8, and by the House 362-57. This legislation was signed into law by Democratic President William Jefferson “Bill” Clinton on November 12, 1999.[iii]

The law allowed the traditional investment brokers to create and sell High Risk Investment Products to traditionally Low Rise Investment Banks that led to sub-prime mortgage fiasco and Hedge Fund meltdown of 2007. Historically, the combined industry has been known as the “financial services industry”.[iv]

This post will document, reference and detail how the mortgage meltdown occurred.

This is what the data will show:

  • The increase of low income housing, sub-prime loans in the Clinton and Bush administration were NOT the prime factor in the economic crisis although they did contribute in a small way.
  • A large ramp up in purchasing of Mortgage Backed Securities (MBS) under pressure from the Bush administration to meet the 56% low income housing requirement of President Bush contributed more significantly to the collapse.
  • The market demand created by the MBS in the private sector for 30 trillion dollars of unregulated, credit default swaps was the final and most significant factor in the mortgage meltdown.

In 2008 a Washington Post article stated,

In 1995, President Bill Clinton’s HUD agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that included loans to low-income borrowers. The idea was that subprime lending benefited many borrowers who did not qualify for conventional loans. HUD expected that Freddie and Fannie would impose their high lending standards on subprime lenders.  Banks typically back prime loans with customers’ deposits. But subprime lenders often rely on money from Wall Street investors , who buy packages of loans as investments called mortgage-backed securities.[v]

Many folks quote this article but here is the history that proceeded President Clinton’s action:

Conventional loans are low risk.  Sub-prime loans are higher risk, non-conventional loans.

How did non-conventional, sub-prime loans get started[vi]?

Fair Housing Act[vii] of 1968 – President Lyndon B. Johnson

It was a follow-up to the Civil Rights Act of 1964. While the Civil Rights Act of 1866 prohibited discrimination in housing, there were no federal enforcement provisions.

[viii] of 1974 – President Gerald Ford

It made it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age.

Home Mortgage Disclosure Act[ix] of 1975 (HMDA) – President Gerald Ford

It requires financial institutions to maintain and annually disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications involving 1 to 4 unit and multifamily dwellings. It also requires branches and loan centers to display a HMDA poster.

HMDA was designed by the Federal Reserve Board in order to:

Help public officials to distribute public-sector investments

Discover if financial institutions are serving housing needs of communities

Identify where there are discriminatory lending practices

Community Reinvestment Act of 1975[x] – President Jimmy Carter

It was designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.

The Questionable Authority is a blog that explains redlining well,

Let’s start with the Community Reinvestment Act and the reasons that it was passed. For decades prior to the law’s passage, banks engaged in a process known as redlining, where they declined to write loans in certain geographic areas – typically low-income areas with large minority populations. They did not decline to write bad loans in these areas; they refused to write any loans at all. For example, in 1975 the largest bank in the Bronx wrote a grand total of 32 loans in the entire borough (Rooney 1995, p.50). No loans means no new businesses, no new housing, no opportunity. [xi] 

Here is a historical chart based on The American Institute of Policy Research and the Government Accounting Office.[xii] [xiii] The columns are:

the total sub-prime loans as a percentage of all loan originations (Col 1).  The total includes Government Sponsored Enterprises (GSEs are Freddie, Fannie and FHA) and private mortgage companies.  Freddie and Fannie are not government agencies.

the percent of GSE sub-prime loans (Col 2).  For example, 1997 the GSE sub-prime loans were 51% of the total originations of 19%.

the total in billions of all of all loan originations (Col 3).

the total in billions of all sub-prime loans (Col 4) including private sector, GSE and FHA.

the total in billions of sub-prime, GSE and FHA loans (Col 5).

the percent of the total market of GSE and FHA, sub-prime loans (Col 6)

the default percentage of the total market (Col 7)

the amount in billions of the total market defaults (Col 8 )

Note: All currency amounts in billions

Year    Col 1    Col 2    Col 3    Col 4  Col 5  Col 6  Col 7  Col 8

1997    19%     51%     $926    $176    $90      10%     0.9%    $8

1999    22%     61%     $1050  $231    $141    13%     0.9%    $12

2001    19%     65%     $1437  $273    $177    12%     0.7%    $17

2003    17%     67%     $1765  $300    $201    11%     0.6%    $21

2005    26%     43%     $1042  $271    $117    11%     1.5%    $9

2007    18%     70%     $2033  $366    $256    13%     0.5%    $28

Column 1 show that, for the years shown, all private sector and public sector sub-prime loans which includes low income loans peaked in 2005 at 26%.

Column 2 shows that, for the years shown, all

The American Institute of Policy Research further states,


Subprime Loans as a percentage of total originations were fairly constant for the period 1997-2003, averaging about 19.5%. The percentage averaged 26% for 2004-2006, before declining to 18% in 2007.[xiv]


Non-conforming, sub-prime loans were a small percentage of all mortgage originations. 

Fannie, Freddie and FHA were an even smaller percentage of all sub-prime loans.

Defaults on all mortgages were even smaller

In 1997, two years after the Clinton and HUD issue, GSE and FHA sub-prime loans represented about 10% of the total market.  Even in the Bush administration this only grew 13%.

This is a historical chart based on a paper presented to the Financial Crisis Inquiry Commission.[xv] The columns are:

GSE new mortgage business as a percentage of total single family mortgage originations (Col 1)

FHA new mortgage business as a percentage of total single family mortgage originations (Col 2)

Private, sub-prime new mortgage business as a percentage of total single family mortgage originations (Col 3)

Private, high risk (stated income, etc.) new mortgage business as a percentage of total single family mortgage originations (Col 4).  High risk was not tracked until 2002.

Year    Col 1    Col 2    Col 3    Col 4

1997    32%     9%       14%     NA

1999    42%     9%       12%     NA

2001    44%     6%       9%       NA

2003    51%     4%       10%     21%

2005    30%     2%       32%     42%

2007    30%     2%       34%     45%

The report further states,

It thus appears that the subprime lending innovations over this period actively displaced GSE and FHA activity, leading to the declines in their market shares. [xvi]

Conclusion: From 2003 to 2006 GSEs and FHA new market share went down significantly while private mortgage company’s market share on sub-prime, high risk loans went up significantly.

MBS are packages of mortgages (sort of like mutual funds) that are bought and sold on in the stock market.  They are mortgages bought from private companies and bundled into packages by huge trading firms (you know the ones we bailed out) and sold on the stock exchange.

In 1997 the GSEs owned about 12% of the total market share of these securities. In 2001 the GSEs owned about 15% of the total market share of these securities.  In 2008 this percentage had grown dramatically to 40%. 

In intervening years it was much more.  President Bush directed his HUD director to pressure the GSEs into buying massive amounts these MBS on the open market.  This created huge market for these securities and encouraged more and more risky private sector mortgages so they could be bought, bundled and sold on the open market largely to Fannie and Freddie.

As the Washington Post article states,

But by 2004, when HUD next revised the goals, Freddie and Fannie’s purchases of subprime-backed securities had risen tenfold. Foreclosure rates also were rising.

That year, President Bush’s HUD ratcheted up the main affordable-housing goal over the next four years, from 50 percent to 56 percent. John C. Weicher, then an assistant HUD secretary, said the institutions lagged behind even the private market and “must do more.”

For Wall Street, high profits could be made from securities backed by subprime loans. Fannie and Freddie targeted the least-risky loans. Still, their purchases provided more cash for a larger subprime market.

“That was a huge, huge mistake,” said Patricia McCoy, who teaches securities law at the University of Connecticut. “That just pumped more capital into a very unregulated market that has turned out to be a disaster.”[xvii]

How did the GSE’s accomplish this?  As the article further states:

In 2003, the two bought $81 billion in subprime securities. In 2004, they purchased $175 billion — 44 percent of the market. In 2005, they bought $169 billion, or 33 percent. In 2006, they cut back to $90 billion, or 20 percent. Generally, Freddie purchased more than Fannie and relied more heavily on the securities to meet goals.

“The market knew we needed those loans,” said Sharon McHale, a spokeswoman for Freddie Mac. The higher goals “forced us to go into that market to serve the targeted populations that HUD wanted us to serve,” she said.

But because Fannie and Freddie were buying mortgage-backed securities rather than the actual subprime loans, their involvement came too late to require stiffer standards from lenders.

Fannie and Freddie “made no progress in civilizing the market,” said Sandra Fostek, a senior regulator at HUD.

William C. Apgar Jr., who was an assistant HUD secretary under Clinton, said he regrets allowing the companies to count subprime securities as affordable.

“It was a mistake,” he said. “In hindsight, I would have done it differently.”[xviii]

Conclusion: Even though Fannie, Freddie and FHA had much less to do with new loans in the Bush administration they bought huge amounts of MBS in those years to meet President Bush’s 56% housing requirement. 

Additionally, the President encouraged the GSEs to “focus” their “core housing mission” “with respect to low-income Americans and first-time homebuyers” in the following statement from the White House,

The Administration strongly believes that the housing GSEs should be focused on their core housing mission, particularly with respect to low-income Americans and first-time homebuyers. Instead, provisions of H.R. 1461 that expand mortgage purchasing authority would lessen the housing GSEs’ commitment to low-income homebuyers.[xix]

Conclusion:  President Bush had directed HUD to require the GSEs to meet the 56% low income housing requirement.  This pressured the GSEs to buy massive MBS.  This created a massive market for junk mortgages.

Credit Default Swaps are insurance policies on mortgages, sort of like the futures market for commodities for MBS.  Credit Default Swaps are not regulated.  The government did not own credit default swaps.  This was purely a private market commodity.

Between 2000 and 2008, the market for such swaps ballooned from $900 billion to more than $30 trillion.[xx]

This is what brought AIG down.

Goldman Sachs played both sides MBS and Credit Default Swaps.

When the Fannie and Freddie bought huge amounts of MBS, pressured by the Bush administration, the market for credit default swaps went astronomical.  This is ultimately what broke them and resulted in tax payers having to bail them out. [xxi]

If you do not believe me what about Greenspan, Treasury Secretary Paul O’Neill, Securities and Exchange Commission chairman Harvey Pitt, and Commodity Futures Trading Commission chairman James Newsome,

In September 2002, Greenspan, Treasury Secretary Paul O’Neill, Securities and Exchange Commission chairman Harvey Pitt, and Commodity Futures Trading Commission chairman James Newsome wrote a letter to members of Congress to note their opposition to legislation that would regulate derivatives. They wrote:

We believe that the [over-the-counter] derivatives markets in question have been a major contributor to our economy’s ability to respond to the stresses and challenges of the last two years. This proposal would limit this contribution, thereby increasing the vulnerability of our economy to potential future stresses….

We do not believe a public policy case exists to justify this governmental intervention. The OTC markets trade a wide variety of instruments. Many of these are idiosyncratic in nature….

While the derivatives markets may seem far removed from the interests and concerns of consumers, the efficiency gains that these markets have fostered are enormously important to consumers and to our economy.

Greenspan and the others urged Congress “to be aware of the potential unintended consequences” of legislation to regulate derivatives.

They got it exactly wrong. Swaps and derivatives ended up undermining, not bolstering, the economy.[xxii]

This data clearly shows that:

The increase of low income, sub-prime loans and the low overall default rate of all loan originations (1.5% in 2005 was the highest tracked in this data, through 2007).  This dispels that myth that the crisis was caused by loan defaults of low-income folks.

The huge increase of MBS purchased by the GSEs from 2003 through 2006 under pressure from the Bush administration to meet the 56% affordable housing requirement along with the 30 trillion dollar credit default swap fault market it created in the private sector was the cause of the housing bubble that burst into the subsequent economic crisis.  Even Alan Greenspan, a Republican, admitted in his interview Brian Naylor,

BRIAN NAYLOR: The man once known as the maestro for his direction of the nation’s economy as Fed chairman sat for four long hours yesterday, watching lawmakers who once cheered his performances turn into harsh critics. Testifying before the House Oversight Committee, Greenspan didn’t down play the severity of the crisis in the nation’s markets.


Mr. ALAN GREENSPAN (Former Chairman, Federal Reserve): We are in the midst of a once-in-a-century credit tsunami. Central banks and governments are being required to take unprecedented measures.


NAYLOR: Under questioning from Democrats on the panel, Greenspan conceded he might have been, as he put it, partially wrong in not moving to regulate trading of some derivatives that are among the root causes of the credit crisis. He also admitted his free market ideology may be flawed. This exchange with committee chairman, Democrat Henry Waxman of California, verged on the metaphysical.


Representative HENRY WAXMAN (Committee Chairman, Democrat, 30th District of California): You found a flaw in the reality…


Mr. GREENSPAN: Flaw in the model that I perceived is a critical functioning structure that defines how the world works, so to speak.


Rep. WAXMAN: In other words, you found that your view of the world, your ideology was not right. It was not working.


Mr. GREENSPAN: How it – precisely. That’s precisely the reason I was shocked, because I’ve been going for 40 years or more with very considerable evidence that it was working exceptionally well.[xxiii]

This is what happens when the private sector and government work in collusion with each other.  Between the Democrats and the Republican’s who do you suppose would have the explicit, stated purpose of doing that?  Hint: Who wants to privatize Social Security[xxiv] and Medicare?  Who do you think is going to pay for it?

[i]Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public,

1968 to 2007, in Billions of Dollars

Sources: Congressional Budget Office; Office of Management and Budget.

Date        Deficit (-) or Surplus           Debt Held by the Public

1968                -25.2                            289.5

1969                3.2                               278.1

1970                -2.8                              283.2

1971                -23.0                            303.0

1972                -23.4                            322.4

1973                -14.9                            340.9

1974                -6.1                              343.7

1975                -53.2                            394.7

1976                -73.7                            477.4

1977                -53.7                            549.1

1978                -59.2                            607.1

1979                -40.7                            640.3

1980                -73.8                            711.9

1981                -79.0                            789.4

1982                -128.0                          924.6

1983                -207.8                          1,137.3

1984                -185.4                          1,307.0

1985                -212.3                          1,507.3

1986                -221.2                          1,740.6

1987                -149.7                          1,889.8

1988                -155.2                          2,051.6

1989                -152.6                          2,190.7

1990                -221.0                          2,411.6

1991                -269.2                          2,689.0

1992                -290.3                          2,999.7

1993                -255.1                          3,248.4

1994                -203.2                          3,433.1

1995                -164.0                          3,604.4

1996                -107.4                          3,734.1

1997                -21.9                            3,772.3

1998                69.3                             3,721.1

1999                125.6                           3,632.4

2000                236.2                           3,409.8

2001                128.2                           3,319.6

2002                -157.8                          3,540.4

2003                -377.6                          3,913.4

2004                -412.7                          4,295.5

2005                -318.3                          4,592.2

2006                -248.2                          4,829.0

2007                -160.7                          5,035.1


[ii]Gramm–Leach–Bliley Act


[iii]Gramm–Leach–Bliley Act


[iv]Gramm–Leach–Bliley Act


[v]How HUD Mortgage Policy Fed The Crisis


[vi] Community Reinvestment Act




[viii]US Code, 15 U.S.C. § 1691


[ix] Home Mortgage Disclosure Act of 1975


[x] Community Reinvestment Act



[xii]Table 3: Detail for Subprime Loans – see endnotes for sources (page 10 pdf)


Figure 1: GSE Investment Portfolio and MBS ($ Billions, Left Axis),

GSE % of Total Outstanding Single Family Mortgages (Right Axis)


[xiii]  GAO report (page 18 for sub-prime data and page 21 for default rates data in pdf):


[xiv]http://www.aei.org/docLib/Pinto-High-LTV-Subprime-Alt-A.pdf (page 12 pdf)

[xv]Figure 1: GSE Investment Portfolio and MBS ($ Billions, Left Axis),

GSE % of Total Outstanding Single Family Mortgages (Right Axis)


[xvi]Figure 2: GSE, FHA, Subprime, and High Risk New Mortgage Activity as Percentage of Total Single‐Family Mortgage Originations (page 9 pdf)


[xvii]How HUD Mortgage Policy Fed The Crisis


[xviii]How HUD Mortgage Policy Fed The Crisis


[xix]Statement from the White House (President Bush) October 26, 2005:



[xxi]Interesting Article


See also,





[xxiv]To those that say they could invest their Social Security dollars I can tell you as an active trader that even professionals rarely do better than market.  I wouldn’t mind if the Congress did allow folks to do their own investing but it is sort of like people that do not have health insurance…when they do need medical care they end up in the emergency room and cost all of us more money.  However, if we could figure out a way for people that invested their own Social Security dollars and lost it all to keep from ending up on the taxpayer’s bill I would have no problem with it.  It is true that the Bush Administration was only pushing for a lower percentage of Social Security dollars that could be invested privately but this debate goes back many decades to the beginning of Social Security.  The Republicans since FDR would like to get rid of or never have had Social Security.  Since they have failed to get rid of it in previous decades their current effort is to make a fundamental change to the trust fund (which can only be done through a very difficult act of Congress) to allow a small percentage of individual investment.  If they could accomplish this subsequently increasing the allowed percentage would be a much easier Congressional task.

Here are more references for the Republican attempts to privatize Social Security in this decade:

Assorted articles concerning Republican’s plans to privatize Social Security:

Republican Privatization to Eliminate Medicare and Social Security

What are Republicans trying to privatize Social Security?

Social Security Privatization

Pelosi blasts Republican plan to privatize Social Security

National Review: Social Security Privatization a Winning Issue

Social Security Still Needs to Be Privatized

Social Security

Republican bills aimed at privatization:

Report: “Social Security Reform: Current Issues and Legislation,” By Dawn Nuschler. Congressional Research Service, Library of Congress. Updated May 18, 2007.http://www.house.gov/waxman/pdfs/crs/RL33544.pdf

Page CRS-18:

In the 109th Congress, 10 Social Security reform bills were introduced as follows: H.R. 440 (Representative Kolbe and Representative Boyd), H.R. 530 (Representative Sam Johnson), H.R. 750 (Representative Shaw), S. 540 (Senator Hagel), S. 857 (Senator Sununu), H.R. 1776 (Representative Paul Ryan), H.R. 2472 (Representative Wexler), S. 1302 (Senator DeMint), H.R. 3304 (Representative McCrery), and S. 2427 (Senator Bennett). All but two of the measures (H.R. 2472 and S. 2427) would have established individual accounts to supplement or replace traditional Social Security benefits, among other changes.

Report: “Social Security: The Chilean Approach to Retirement.” By Christopher Tamborini. Congressional Research Service, Library of Congress, May 17, 2007. http://assets.opencrs.com/rpts/RL34006_20070517.pdf

Page CRS-3: “During the 109th Congress, 10 Social Security reform bills were introduced; all but two of these would have allowed workers to invest some part of their earnings in individual retirement accounts, either to supplement the Social Security system (often referred to as add-on accounts) or to replace part of the system (often referred to as carve-out accounts).13 No legislation received congressional action.”

Report: “Social Security Reform: Current Issues and Legislation,” By Dawn Nuschler. Congressional Research Service, Library of Congress. Updated May 18, 2007. http://www.house.gov/waxman/pdfs/crs/RL33544.pdf

Page CRS-18: “In the 109th Congress, 10 Social Security reform bills were introduced as follows: H.R. 440 (Representative Kolbe and Representative Boyd), H.R. 530 (Representative Sam Johnson), H.R. 750 (Representative Shaw), S. 540 (Senator Hagel), S. 857 (Senator Sununu), H.R. 1776 (Representative Paul Ryan), H.R. 2472 (Representative Wexler), S. 1302 (Senator DeMint), H.R. 3304 (Representative McCrery), and S. 2427 (Senator Bennett).”

Web page: “Biographical Directory of the United States Congress 1774-Present.” United States Congress. Accessed September 17, 2008 at http://bioguide.congress.gov/biosearch/biosearch.asp

{This site was used to determine the party affiliations of the sponsors of the following bills:}

H.R. 440 – Representative Kolbe (R-AZ) and Representative Boyd (D-FL)

H.R. 530 – Representative Sam Johnson (R-TX)

H.R. 750 – Representative Shaw (R-FL)

S. 540 – Senator Hagel (R-NE)

S. 857 – Senator Sununu (R-NH),

H.R. 1776 – Representative Paul Ryan (R-WI)

S. 1302 – Senator DeMint (R-SC)

H.R. 3304 – Representative McCrery (R-LA)

Report: “Social Security Reform: Current Issues and Legislation,” By Dawn Nuschler. Congressional Research Service, Library of Congress. Updated May 18, 2007. http://www.house.gov/waxman/pdfs/crs/RL33544.pdf

Page CRS-23:

During the 110th Congress, two comprehensive Social Security reform measures have been introduced: H.R. 1090 (Social Security Guarantee Plus Act of 2007) and H.R. 2002 (Individual Social Security Investment Program Act of 2007). H.R. 1090, which is the same as H.R. 750 in the 109th Congress, would establish voluntary individual accounts funded with general revenues, among other program changes. H.R. 2002, which is the same as H.R. 530 in the 109th Congress, would establish individual accounts funded with a redirection of current payroll taxes, among other program changes.

{H.R. 1090 was sponsored by Rep. Ron Lews (R-KY). H.R. 2002 was sponsored by Rep. Samuel Johnson (R-TX).}

Bill: “S.2765, Saving Social Security Act of 2008.” United States Senate, March 13, 2008. http://thomas.loc.gov/

Sec. 101. Establishment of an investment-based option for social security benefits.

 Bill: “H.R.4922: Savings Account for Every American Act of 2007.” United States House of Representatives, December 19, 2007. http://thomas.loc.gov/

 {This bill calls for the establishment of individual “S.A.F.E.” savings accounts through payroll deduction to be used in retirement. A S.A.F.E. account has meaning as provided for by section 222 (c) of the IRS Code of 1986.}

 Bill: “H.R.1090: Social Security Guarantee Plus Act of 2007.” United States House of Representatives, February 15, 2007. http://thomas.loc.gov/

 [March 13, 2007: Referred to House Subcommittee on Social Security.]

 Bill: “H.R.2002: Individual Social Security Investment Program Act of 2007.” United States House of Representatives, April 23, 2007. http://thomas.loc.gov/

  [April 25, 2007: Referred to House Subcommittee on Social Security.]

 Bill: “S.2765: Saving Social Security Act of 2008.” United States Senate, March 13, 2008. http://thomas.loc.gov/

  [March 13, 2008: Referred to Senate Committee on Finance.]

 Bill: “H.R. 4922: Savings Account for Every American Act of 2007.” United States House of Representatives, December 19, 2007. http://thomas.loc.gov/

 [December 19, 2007: Referred to Committee on Ways and Means and Committee on Oversight and Government Reform.]

Report: “2008 Republican Party Platform.” Republican National Committee, September 2008. http://www.gopplatform2008.com/2008Platform.pdf

Page 19: “Comprehensive reform should include the opportunity to freely choose to create your own personal investment accounts which are distinct from and supplemental to the overall Social Security system.”

Web page: “Obama ’08, Seniors and Social Security” Obama for America. Accessed November 11, 2008 at http://www.barackobama.com/issues/socialsecurity/

“In the midst of the 2005 debate over Social Security privatization, Obama gave a major speech at the National Press Club forcefully arguing against privatization. He also repeatedly voted against Republican amendments that aimed to privatize Social Security or cut benefits.”

Transcript: “The Republican Debate on Fox News Channel,” New York Times, October 21, 2007. http://www.nytimes.com/2007/10/21/us/politics/…

“And you have to go to the American people and say we don’t — we won’t raise your taxes. We need personal savings accounts, but we got to fix this system.”

Report: “Strengthening Social Security and Creating Personal Wealth for All Americans.” The President’s Commission to Strengthen Social Security, December 21, 2001. http://www.csss.gov/reports/Final_report.pdf

Page 11: “Personal accounts improve retirement security by facilitating wealth creation and providing participants with assets that they own and that can be inherited, rather than providing only claims to benefits that remain subject to political negotiation.”

The Absolute Necessity of Rhetoric

In President Obama’s recent trip to Afghanistan he told the troops that he would not send troops anywhere that was not “absolutely necessary” (http://frontpagemag.com/2009/10/27/mission-abandoned-%e2%80%93-by-alan-w-dowd/).  When President Bush started the war in Afghanistan he justified it as a crusade, vengeance for 911, a Texas style hanging for Al-Qaida and killing the ones responsible for 911.  I never heard him state that he was going to bring the terrorists responsible for 911 to justice.  He may have made that statement but most of the statements were along the line previously described.  Using these rhetorical ploys Bush was able to get the support he needed to start the war in Afghanistan.  Hatred is always a strong emotion while justice is emotionally a bit puny.  Bush started the war against Afghanistan based on rhetoric about getting Al-Qaida.  To date Al-Qaida is still around and our rhetoric about our enemy Al-Qaida is also used freely about the Taliban.  While no one would suggest that the Taliban is a great group of guys, they were not the stated reason why we went to war in Afghanistan.  Fanning the flames of 911, Bush was able to start a war.  His rhetoric became President Obama’s “absolute necessity”. 

I have previously stated that as leader of the United States, President Bush should have stated that we would bring Al-Qaida to justice.  Preferably, this would be done through the United Nations, the World Court and pressure from the World Monetary Fund (in Afghanistan and Pakistan).  President Bush’s rhetoric should have made justice the guiding principle.  We would have kept the sympathies of the world and made justice the value that everyone, no matter what their political persuasion, sympathetic to the universality of justice.  Vengeance and hatred on the other hand are regionally specific.  Those that hate and want vengeance are driven by their own internal necessity not by any universal appeal, by an ideal that everyone could think is worthwhile.  As I have also mentioned in another paper, barring the earnest attempt to get justice in a region of the world where justice is highly lacking, the alternative would be US Special Forces, the CIA, mercenaries, and covert bribes and pressure.  Don’t think it can’t be done; we had a whole cold war based in Afghanistan against the Russians using these techniques many years ago.  However, the political rhetoric should always be concentrated on universal values not regional and circumstantial emotions.

When our hatred drives our rhetoric the rhetoric can take on a life of its own in popular culture.  The switch from admirable, universal ideals to self-aggrandizing, raw and base instincts that become yet another mindless iteration of the past; it becomes its own necessity.  The necessity driven by hatred always ends badly.  The necessity driven by high ideals, historically always ends well.  Examples of the latter include the founding fathers, Gandhi, Martin Luther King Jr., Jesus, etc.  Unfortunately, the earlier is typically the blunder of humankind.

Since rhetoric based in base instinct got us into Afghanistan, I think President Obama had no other choice but to use rhetoric to get us out of Afghanistan.  It has been done before (Vietnam comes to mind) – we declare victory for x, y, z reasons and get the hell out.  We pursue the cause of bringing Al-Qaida to justice using the previously discussed strategies.  As it is, now we are looking at an endless war that has the tendency to expand as these situations typically do.

Another example of rhetoric gone badly is the recent militant rhetoric used by the Republican Party against the Democrats.  The Republican leaders play on the strong emotions of hatred and violence with inflammatory rhetoric and “wash their hands” of it when their words start taking a life of its own in popular behavior.  If you want to understand how Hitler was able to do what he did you can see the beginnings of it in these kinds of rhetorical ploys. 

While personally, I have never opposed capital punishment in cases where there is “no shadow of doubt” about the defendant’s guilt, I have opposed it based on the rhetorical dynamic described above.  When the necessity of rhetoric is allowed to run rampant Texas style executions become more and more “normal” and statistics about wrongful deaths and ethnic inequalities of the death penalty become more and more prevalent.

President Obama should have held to his higher ideals and not adopted the rhetorical necessity handed to him by the Bush administration. 

On a more philosophical level, the dynamic of rhetorical necessity tells us something about human’s unique way of being-in-the-world.  Our narratives of history become our cannon.  The ill-conceived actions that typically follow continue to create generations of veterans and Republican voters that sanctify our motivations and our histories.  The perceived alternative would be to exist in meaninglessness.  God, the self-evident and the a priori surround us as witnesses to our ultimate worthiness and meaning.  In the margins of our hubris plays the alter-ego, the lie of truth and the future seeds of our own undoing.