Comment by tlogan
20 days ago
There has to be some lag, and it is more about who controls Congress.
For example, the housing crisis and bubble were largely driven by legislation passed years earlier, including the 1999 repeal of Glass Steagall under Clinton. That was passed by a Republican controlled Congress, and the crisis eventually exploded under Bush. So I do not think either Clinton or Bush can be directly blamed for the housing crash. It is the repeal of the glass steagall act.
And was the dot com bubble crash in early 2000s caused by Clinton or by Bush? Or some legalization passed a long time ago? Or it just a business cycle?
More broadly, I would argue that presidents, and even legislators, have limited control over the actual health of the economy. Are we going to say Trump is responsible for the AI boom? And if this AI boom collapses into a massive bubble burst under the next administration, will that president be blamed instead?
The 2008 housing crisis would have played out exactly the same if Glass-Steagall had still been in effect. The big banks that failed--Bear Stearns, Lehman Brothers, Merrill Lynch--were all pure investment banks. The same applied to Goldman Sachs and Morgan Stanley, back then. And most of the small banks that failed were pure commercial banks.
The whole mortgage-backed security and collateralized debt obligation show would also have been legal under Glass-Steagall and had been common practice for years by the time of the repeal. The same with NINJA and 0% down-payment loans.
Or Covid when roughly 22 million jobs were lost in March and April 2020 alone