For his entire presidency, George W. Bush has tried to avoid the fate of his father, brought low by a feeble economy. Now, as the financial crisis radiates far beyond Wall Street, Mr. Bush faces an even grimmer prospect: being blamed, at least in part, for an economic breakdown.
“There will be ample opportunity to debate the origins of this problem,” Mr. Bush said in the Rose Garden on Friday. “Now is the time to solve it.” But in Washington, on Wall Street and on the presidential campaign trail, the debate has already begun…
These experts, from both political parties, say Mr. Bush’s early personnel choices and overarching antipathy toward regulation created a climate, that, if it did not set off the turmoil, almost certainly aggravated it. The president’s first two Treasury secretaries, for instance, lacked the kind of Wall Street expertise that might have helped them raise red flags about the use of complex financial instruments that are at the heart of the crisis…
Vincent R. Reinhart, a former Federal Reserve economist now at the conservative-leaning American Enterprise Institute here, said that, in retrospect, “it would have helped for the Bush administration to empower the folks at Treasury and the Federal Reserve and the comptroller of the currency and the F.D.I.C.” — the Federal Deposit Insurance Corporation — “to look at these issues more closely.” He said it would also have helped “for Congress to have held hearings.”
Instead, voices inside the administration for tougher policing of Wall Street found themselves with few supporters. William H. Donaldson, a former Wall Street executive with respected Republican credentials who became chairman of the Securities and Exchange Commission under Mr. Bush, quit after facing resistance from the White House and Republican members of the agency, who criticized his support for stiffer regulations on mutual funds and hedge funds.
Today, even some sympathetic to Mr. Bush say he cannot disentangle himself from a home-lending industry that ran amok or a banking industry that mortgaged its future on toxic loans. “The crisis definitely happened on their watch,” said Kenneth S. Rogoff, a professor of economics at Harvard who advises Mr. McCain. “This is eight years into the Bush administration. There was a lot of time to deal with it”…
And Mr. Reinhart said the markets seemed to be doing so well that few analysts, either in government or the private sector, had a critical eye. “When everybody is doing better,” he said, “it is difficult to see the underlying weaknesses.” Still, the White House, in the view of critics, fostered a free-market hothouse in which these excesses were able to flower. It avoided regulation of banks and mortgage brokers, leaving much of that work to the Federal Reserve, which, under Alan Greenspan, showed little appetite for regulation…
“There will be ample opportunity to debate the origins of this problem,” Mr. Bush said in the Rose Garden on Friday.
The Bush administration, moving to prevent an economic cataclysm, urged Congress on Friday to grant it far-reaching emergency powers to buy hundreds of billions of dollars in distressed mortgages despite many unknowns about how the plan would work…
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