Quote:
Originally Posted by DonQuigleone
It's not so much that the bush administration did anything to cause the recession, more that they failed to do anything to stop it. They should have seen a bubble was forming, and they didn't do a thing. Furthermore, the biggest cause was the extreme financial deregulation and low interest rates enacted by Greenspan, right up until 2006. Admittedly greenspan was around during clinton, but a lot of worst deregulation took place during the bush years. Furthermore, Clinton at least had an 800 billion dollar surplus, Bush threw it away on Tax cuts and poorly thought out wars.
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Governments can do very little against bubbles in the economy, only central banks can act by raising interest rates. It's also notoriously hard to detect a bubble when it is in progress. You only know for sure that there was a bubble after it bursts.
The Bush administration shares only limited responsebility for the financial crisis. They can be blamed for waging two wars on credit and lowering taxes which increased the national debt, but that did not cause the melt down of the financial sector and the resulting recession.
The legislation that laid the foundation for the current crisis in the financial sector can be traced as far back as the Reagan adminstration. That is when the whole mess started with the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn–St. Germain Depository Institutions Act of 1982. The last major deregulations were completed during the Clinton years with the repeal of the Glass–Steagall Act and the Commodity Futures Modernization Act of 2000. These were all instrumental for allowing financial instutions to merge to become "Too big to Fail" which in turn induced excessive risk taking by their managements at the taxpayers expense.
For a while the financial deregulation did seem like a good idea as greater efficiency in the financial system *does* allow the economy to grow faster. Few if any experts at the time realised or appreciated the trade off between faster growth and increased systemic risk. In the end it was a bipartisan effort (backed by some very effective lobbying from the financial sector). Greenspan recently suggested a very old (and effective) medicine, standard oil style breakup of large financial conglomerates.