Well, what we all suspected has now been made official. From the New York Times:
Mr. Paulson and other senior advisers to Mr. Bush say the administration has responded well to the turmoil, demonstrating flexibility under difficult circumstances. “There is not any playbook,” Mr. Paulson said.
Why am I not surprised to see that what ought to be viewed as a failing is instead spun as a virtue?
I have mixed feelings about the article in which this juicy quote appears, “White House Philosophy Stoked Mortgage Bonfire.” While it does chronicle some of the ways that the Bush “ownership society” vision, which included raising the level of homeownership, it makes the Administration sound like a bunch of hapless innocents, who had good goals but failed to see that the implementation of their objectives left a great deal to be desired<
But in private moments, aides say, the president is looking inward. During a recent ride aboard Marine One, the presidential helicopter, Mr. Bush sounded a reflective note.
“We absolutely wanted to increase homeownership,” Tony Fratto, his deputy press secretary, recalled him saying. “But we never wanted lenders to make bad decisions.”
That is more than a bit of revisionist history. If you don’t believe in oversight, pray tell how are you going to assess the quality of decisions being made? The view, until so many investments came a cropper, was that any agreement freely entered into by two parties was OK (well, as long as it doesn’t involve illegal substances or copyright theft).
And the article never questions the thesis that homeownership is a good thing, merely that the envelope should not have been stretched to make it happen. We’ve questioned that view, and Felix Salmon has found some useful data (his latest is that “Homeownership Makes You Fat and Unhappy“).
But the article nevertheless has some quotes near and dear to our heart, such as:
“This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight,” said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. “To make the market work well, you have to have a lot of rules.”
Seidman unwittingly exposes the fundamental contraction at the root of the “free market” construct” for markets to work well enough for parties to deal with each other on a transactional basis (ie, no or limited pre-existing relationship), there HAS to be some level of regulation. And Madoff illustrates that dealing with a supposedly known party with long-established relationships isn’t safe).
And in an amusing bit of synchronicity, another New York Times story, a comment by Alan Blinder, takes on Paulson’s sorry record of TARP course-changes. While most of the arguments are familiar, Blinder dispatches them convincingly and colorfully. For instance:
So here we are, looking at an all-too-familiar story. The administration that brought you the Iraq war and the Katrina response is locking in another disaster before it leaves town. What to do?
You can read the piece here.