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Still Playing the Blame Game

So President Bush took on the enormous task of explaining the financial crisis to Americans in simple, clear terms last night – and singled out Fannie Mae and Freddie Mac for blame. Bush said they “fueled the market for questionable investments.”

The two agencies obviously have their problems, or the government wouldn’t have seized them earlier this month. But citing them as the major causes for the crisis? Financial bloggers are shaking their heads on this one.

From Housing Wire:

Remember that this mess started with a private-party securitization party that left the GSEs gasping for air, and market share. Either we’re witnessing political agenda-setting at its worst, or simple ignorance by an administration that has seemingly consistently failed to understand the nature and reach of this crisis. Neither is what should be fueling a desire to provide Treasury with $700 billion to buy assets nobody can price. If you want to know who fueled this mess, look no further than the carnage of independent investment banks like Bear Stearns, Lehman Bros., and others like them. Those still standing (namely, Goldman and Morgan Stanley) are now, conveniently, commercial banks — or have merged with one — and they will benefit enormously from this bailout program. Or look at our own government all the way back to 1992; pushing housing has been a favorite political pet since Bill Clinton first ran for office, and Republicans only furthered the theme since that time; noteably, the current Bush administration’s own push for “the Ownership Society” comes to mind.

At Economist’s View, Mark Thoma summarizes the political posturing behind the inclusion:

Until Republicans started trying to claim that Fannie and Freddie caused the financial meltdown as a means of tying Obama to the crisis – a strategy that backfired badly when all of the embarrassing connections to Fannie and Freddie within the McCain campaign were revealed – nobody was saying Fannie and Freddie caused the crisis. Republicans simply worked backwards – they found connections between Democrats and Fannie and Freddie (never thinking to ask about their own connections), then tried to blame the crisis on Fannie and Freddie so as to make people think it was the Democrat’s fault. And it’s still going on despite the fact that the data doesn’t support this story.

It’s unavoidable that bickering over who is to blame for the worst financial crisis since the Great Depression will be part of our national conversation for some time to come. But throwing Fannie and Freddie under the bus, as Housing Wire puts it, doesn’t really help Americans understand what really went wrong, and what needs to be done to fix it. It’s in bad taste, bordering on insulting, that in an address to the nation asking for Americans to put aside their differences and take on a $700 billion tax bailout, Bush would stoop to inserting a partisan shot. And one that’s not even accurate besides.

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