Former Treasury Secretary Says He "Forgot" That People Had To "Afford Their House"
Former Treasury Secretary John W. Snow has told the New York Times that he, along with the entire Bush Administration, simply "forgot" that people had to be able to "afford their house."
One of the main goals of the Bush Administration has always been to increase homeownership among Americans — a fantastic goal — but there was apparently one small flaw in the plan...
From the New York Times:
“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”
This seems like an odd thing to forget... especially for someone as accomplished as Mr. Snow. From 2003 - 2006, he served as the 73rd United States Secretary of the Treasury. Previous to that appointment he worked in the Reagan Administration and earned a Ph.D. in Economics from the University of Virginia. He's currently serving as chairman of Cerberus Capital Management, which among other things, owns 80% of Chrysler.
White House Philosophy Stoked Mortgage Bonfire [NYT]
(Photo:Rich Addicks/Atlanta Journal-Constitution)
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I propose that taxpayers arrange to reduce the maximum compensation of all govenment employees to a level where "affording a house" becomes a meaningful concept to them.
@speedwell: Yes, I do indeed mean that the President should pay for the White House and its expenses out of his own pocket. He would get a set amount of money, and he would have to budget accordingly. Good training for dealing with budget realities, don't you thin?
Well, I suppose it's surprised everyone that dumb homebuyers, in tandem with greedy mortgage brokers, equals a recipe for FAIL.
A lot of economics is based on "the rational consumer" and "the rational seller"...this crisis was lacking a lot on both sides. Shortsightedness FTL.
"He's currently serving as chairman of Cerberus Capital Management, which among other things, owns 80% of Chrysler."
isn't that a statement AGAINST his competency?
Excuse me Mr. Snow? Could you please step to the back of the cell?
Thank you.
Ooops, I forgot where I put the key. Enjoy your stay.
I weep for this nation.
It sure is. Here are their other holdings, which are basically a litany of scarily wounded companies. GMAC is another terrible investment. Then again, nobody in Private Equity seems particularly brilliant at the moment.
Why am I not surprised that he "owns" 80% of chrysler?
I went to the article hoping that the comment was taken out of context, or was explained better. Sadly, it doesn't appear to be the case.
Home ownership has always been considered the "American Dream", and it would have been political suicide for anyone - from either party - to take steps like additional regulation that would have decreased the ability of people - especially of poor, subprime borrowers - from owning houses - especially in an real estate boom where people were seeing their houses going up 20% a year.
@madanthony: Can you imagine what the class-based criticisms would have looked like? "OMG the Rethuglicans are trying to keep poor and minorities out of houses!"
Sounds like a rock vs hard place.
So, were these people that incompetent, or were they only interested in gouging homebuyers with inflated house estimated and ballooning interest rates, and hoping the suckers could keep paying?
Either way, such people deserve to be denied breathable air for a day.
Did they forget that fact, or simply ignore it?
Both Snow and Bush must have forgotten that they have brains. Greenspan too. Call in the Munshkins, we need help!
@The Name's Ash78, Housewares: Call the waaaaaahmbulance, someone's trying to make the GOP work at something.
Finding that balance is what all those expensive PR flacks get paid for.
@KhaiJB: You know, I think Common sense is over rated. Technically, it is Common Sense that got us into this mess. What we need is some one that can look past the Common Sense, and know what is really going on. Common Sense is not all it's cracked up to be.
@moore850: I'm pretty surprised anyone would pony up the $10 to buy 80% of Chrysler, especially in this economy. $10 can feed a family at McDonalds or nearly fill your gas tank.
@KhaiJB: A wise man once said to a scarecrow, who was looking for a brain:
"Back where I come from there are people teaching in universities, who have no more brains than you have. The only thing they have that you don't, is a diploma."
On a side note, there seems to be an emerging pattern with all of these Bush-appointed cronies.
"Whoops. Sorry the market just gone did imploded. What was I supposed to do? I'm just an idiot in a Cabinet-level position. How the hell should I know what's going on?!"
No, he is not incompetent.
He would like you to think so, so as to take the target off of his back for sleeping on the job.
But in all reality, he (and the Bush administration) knew precisely what was going to happen.
He now want's you to think it was an "oversight", or that he's some kind of dumbass. I'm not buying it.
What he did is criminal. He should be in jail.
I don't take it as a literal statement. It's not that they "forgot", it's that they were trying to so hard to make creative financing available to all comers (along with the Congress, can't "forget" their part) they didn't understand that sooner or later the chickens come home to roost. Yeah below market rates are awesome and family A can afford it now, but what about in 2-3 years, can they afford it THEN.
That is what they "forgot". just like I will probably forget that I owe NEWEGG $1,000 in December of 2009. But, the bill will jog my memory right quick, Summer of 2008, Gov'ment got the bill.
Wow, that's quite a slant on this article. The Bush administration didn't "forget" anything. How could anyone have predicted that the average American would have been so monumentally stupid as to sign up for jumbo size mortgages while putting down almost no money with an income of $40,000 a year? The government should not have to account for stupidity of this magnitude.
They forgot despite people telling them, almost shouting it at them, the entire time.
"Yeah, don't listen to them all. They're the crazy ones; not us."
Actually...Most people were shouting, "Yes, that's good, lend to the poor people, yes poor people deserve homes too!!! Lend more, lend more, LEND MORE".
If you shouted, "Don't lend to the poor people who won't be able to afford the loans, when the rate resets!"
Then you were probably labeled a racist and dismissed, instead of being labled financially responsible.
This Monday morning Treasury Secretary stuff is Hi-larious.
Redistrabution of wealth from the bottom up.Lets see we have allowed most good jobs to be shipped overseas. We are taking back the property at firesale prices( plus whatever you allready put in). Now we can price a college ed out of range besides who needs a degree to stock shelves or mow my yard. Soon you will sell me the children or take that lazy 8 year old to work in the mine with you. We are promoting family values I mean who could be closer then 16 people in that 3 bedroom rental shack. Welcome to Pottersville.
Banksters,builders,and real estate agents are more responsible than anyone else.Just watch some of those home programs on TV where young couples are buying 1200ft bungalos for $650k and putting another 100k in improvements and expecting to make a flip.
But those granite counters are nice!
You forgot? Well, I'll be... The solution is so clear now. We need elephants in future administrations. Lots and lots of elephants.
(sorry. my excuse for lame jokes is that it's still before noon.)
@Hank Scorpio: They were aiming for the bubble popping one year after they left office. (Un)Fortunately, their forecasting skills are about as solid as their management ones.
Oh. And money. Lots and lots of lobbyist money.
My favorite part of the article is when the administrator responsible for Freddie & Fannie, Armando Falcon, wrote a scathing report warning of these GSEs' impending collapse, the White House's response was to, well, I'll just quote:
"Days later, as Mr. Falcon was in New York preparing to deliver a speech about his [critical] findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.
His warnings were buried in the next day's news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon's report had flagged."
@The Name's Ash78, Housewares: Right, they just presumed that the home buyers were 'informed, rational decision makers' when they signed up for a no-down, interest-only ARM that would balloon to 27% in 5 years. Never mind that *they* would never agree to such terms, but someone else giving them the OK must mean that they know what they're doing...
@Eric1285: Even with my belief that people as a whole are stupid, people's stupidity alone isn't the root of the problem. Without the predatory lenders pushing these loans through to people who obviously couldn't handle them, the result we have now couldn't have come about.
If you present enough people with a promise that they can buy a house, then turn it for easy profit when it gains 40% value in 2 years risk-free, you will eventually find enough of them who will go along just for the chance at having more money.
Where the government is as fault is that it removed the safeguards in place that would have otherwise prevented this from happening. The market was moving along so well, the government stepped aside completely just to let it keep it's momentum. In doing so, they created a runaway train that has now crashed into the mountain.
@edebaby: I don't understand why he or anyone else would think that being incompetent should give you a pass.
If I hit someone with a car I'm pretty sure saying that I'm an incompetent driver won't keep me out of jail.
@KhaiJB: He knew exactly what he was doing. It's not "common sense" he lacks; it is a moral sense to check his unbridled greed. This explanation is a lie.
Slightly off topic, but Mr. Snow is a part of a team of lobbyists that is getting a piece of that bailout money for Chrysler. Cerberus is a super-ultra private company that has been very successful. They made a bad bet paying 7.4B for Chrysler. Here he is connected with Bush and Co, getting a handout.
They could just use their own money to restructure Chrysler.
"Context" is such a weasel word in the way he's using it. What a dishonest scumbag. I don't believe for a second that this whole thing wasn't intentionally neglected, at the very least. I think they thought they could ride it out, get the credit for the boom times, and then pin the bubble bursting on a Democrat. They're still going to try, BTW, even though the bubble burst before the Democrat got into office.
Elephants don't usually live in houses, so you can't expect them to forget that, because they wouldn't know in the first place.
Well, obviously standards don't mean much anymore. The government started lowering standards to get a mortgage in the late 70's. If you allow anyone to get a mortgage then there will be issues of foreclosure. A person who makes 30,000 dollars getting a 200,000 dollar house makes no sense. How can people blame others for their mistake? There is a lack of common sense in this country.....everyone needs to read Thomas Paine's "common sense".
@madanthony: Can you please present your statistics that it was the poor who made up a majority of sub-prime borrowers?
@Eric1285: So the lenders who didn't even bother to verify income are innocent victims?
If you loan a homeless guy $10,000 and he doesn't pay it back, whose fault is it? His for not paying it back or yours for loaning it to him in the first place? Who would your mother slap in the back of the head? Probably both of you.
@speedwell: I agree, it's the same issue with health care, most politicians don't have the financial difficulties that can be associated with having to pay for health care, and getting manhandled by insurance companies who consider things like replacing a severed finger as "elective" surgery. Of course health care isn't going to be a big issue for you when you making millions of dollars and have most your healthcare expensive paid by your employer, in this case, the government.
If they had to pay the ridiculous rate everyone else does and get the run around every time you file a claim and it's denied for no good reason, I'm sure things would change quickly.
@ADismalScience: Wow, isn't Cerberus the two headed dog from hell? Fitting name for a venture capitalist group.
D'oh!
@ARP: you and Wagenejm are right.
This wasn't just customers making bad decisions, there was a lot of pressure tactics and unethical things done by the lenders too.
Out of context:
- "The Bush administration took a lot of pride that homeownership had reached historic highs..." -
Indicating the President and his administration were proud of the fact that home-ownership reached a high during the time he was President.
- "...But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost." -
However, the President and his administration are not proud of the fact that a number of home-owners are living outside of their means and had to to become home-owners.
@copious28: Restructure? No no no...
a) Figure out how to pocket the money you got from the Feds
b) Take out a loan from the Chinese using any worthwile assets as collateral
c) Have Chrysler buy back all of their shares from Cerberus
d) Take whatever is left of Chrysler, fill up the motor with straight 50W, put some sawdust in the rear end and dump the POS on the Feds.
e) Run like hell.
@speedwell: I hope you mean "elected officials" when you say government employees. This government employee has never been able to afford a house.
@howie_in_az: Howie, I wish you could fill a gas tank with $10 of gas...hopefully, we can squeeze that Saudi Royal Family so that'll be a reality.
A lot better than being able to fill a gas *can* with $10 of gas...
proof that a PHD does not include common sense. you have to have that already.