Ben Stein, supposedly right-wing conservative actor and political commentator, appeared on the CBS Sunday Morning program blaming President’s Bush and Obama for the current financial crisis and praised former President Bill Clinton for his financial legacy.
“There’s no doubt that Bill Clinton for all of his issues left the federal budget on a sound financial footing. It was undone by the bursting of the Internet bubble, the two wars following 9/11, but mostly because of the folly of supply side economics, which falsely assured Americans that they could have their cake and it a eat it, too. That large tax cuts would yield higher government revenue. There never was any convincing data to back it up…”
I’m getting really sick and tired of everyone blaming others for what Clinton set the stage for to begin with. While president, Clinton forced the mortgage industry to lower their standards and create programs that allowed more Americans to afford to buy a home. Consequently, the industry ramped up adjustable rate mortgages (ARMs), balloon mortgages and they raised the price of homes that people could afford compared to their income and expenses.
Many of these creative programs seemed great at the time and millions of families bought their first homes or bought larger homes. This had a tremendous boost to the nation’s economy and everything was seemingly rosy.
Five years later, President Bush was in office and people start to realize that they couldn’t afford the new mortgage payments as their adjustable rates increased. More and more homeowners began to default on their mortgages and ended up in foreclosure. Bankruptcies started to increase as people could no longer afford their homes. As the foreclosures and bankruptcies increased, banks and financial institutions became overloaded with what became toxic debt. Real estate prices started to decline as more and more vacant homes began to flood the market. Many businesses and investors who had bought into real estate saw the value of their portfolios dropping. As portfolios and investments declined, business owners found that they needed to cut expenses in order to stay in business so they had no alternative but to start cutting benefits and staff.
A large part of the economic crisis the US is facing is the direct snowball effect of the Clinton mortgage program to put more Americans in homes. What Stein described as a sound financial footing was built on sand, not rock, and it didn’t take long for the financial currents to start undermining that supposedly firm foundation.
If people like Ben Stein are going to point fingers, let’s point them in the right direction.