The liberal media accepts as gospel that the Bush administration deregulated the economy and that this essentially caused the current financial crisis. That’s poppycock according to Scott S. Powell of the Hoover Institution. In an excellent essay he writes in Barron’s:
Contrary to a view popularized during the 2008 presidential election season, the current economic crisis was not the result of deregulation.
The Bush administration made many mistakes, but deregulation was not one of them.
Not only was there no major deregulation passed during the past eight years, but the Bush administration and a Republican Congress approved the most sweeping financial-market regulation in decades.
The bipartisan Sarbanes-Oxley Act was enacted in 2002 to prevent corporate fraud and restore investor confidence after the collapse of Enron and WorldCom. It failed to prevent the accounting fraud and influence-peddling scandals at Fannie Mae and Freddie Mac. And even after those scandals were widely understood, regulators sent Fannie and Freddie back into the market to continue buying subprime loans, lending and borrowing with implied taxpayer backing.
Across the government, the Bush administration supported new regulations that added almost 1,000 pages a year to the Federal Register, nearly a record. If this is insufficient regulation, it’s hard to imagine a scope that would be effective.
We are in this mess largely because critical thought and moral judgment have been subordinated to the politicization of our economy, resulting in regulatory gaps and excessive controls of the wrong kind. […]
I’m not prepared to declare the Bush administration completely blameless for the current mess, but it is true that it absolutely did NOT push deregulation. Quite the contrary, as Powell argues. President Bush’s desire to strengthen the government’s bureaucratic strangehold on the economy almost certainly contributed to the present problems.
The root causes of the market meltdown were the Community Reinvestment Act (CRA) and the socialization of risk through the quasi-governmental monstrosities Fannie Mae and Freddie Mac. Artificially low interest rates didn’t help either.
The Bush administration warned until it was blue in the face about the dangers (“systemic risk,” it’s called) inherent in Fannie Mae and Freddie Mac. Rep. Barney Frank (D-Massachusetts), now chairman of the House Financial Services, and many lawmakers on both sides of the aisle, just didn’t care.
(Hat tip to Noel Sheppard of NewsBusters)