An article with the following headline appeared on several conservative web sites today, 4 April 2013
“New Study Confirms Economy Was Destroyed by Dem Policies”
Nonsense, it says nothing of the sort.
I just got through reading it on the site of the National Bureau for Economic Research (NBER). I had trouble finding it because for some reason, none of the articles published on this subject mentioned its URL or the names of the study or its authors. I shall now disclose the URL so that nobody pulls a fast one on us: http://www.nber.org/papers/w18609
Firstly, practically all economic crises have multiple causes. The only exceptions are economic crises caused by wars or natural disasters.
Accordingly any sentence beginning with “Economy Was Destroyed by …” must end with either the name of a war, or a natural disaster, or several endogenous economic causes.\
I grant that the study proves that the enactment by Democrats of the Community Reinvestment Act (CRA) was indeed ONE of the causes of the subprime mortgage crisis. But it does not quantify the CRA’s effect. Nor does it even pose the question of what OTHER causes may have contributed to the crisis, let alone pinpoint the CRA as its principal cause.
Despite the article's denial that deregulation played a role in bringing on the 2008 financial crisis, I have seen persuasive evidence that deregulation was indeed a major generating factor. See "5 disastrous decisions that got us into this economic mess", by Joseph Stiglitz,
Moreover causes interact with each other. A given event, enactment of the CRA, for example, can foster conditions likely to lead to a crisis. But the actual occurrence of the crisis can usually be averted by timely government action, unless the cause is impervious to government action, like a huge balance of payments deficit, for example. If government fails to act promptly, the crisis breaks out in all its fury. However in that case the cause can just as fairly be called “government inaction” as “ CRA”.
This is what happened in the years leading up to the 2008 financial crisis. The federal government signally failed to act. One aspect of this failure was described by the then Governor of New York, Elliott Spitzer, who wrote in the
Post that Washington
“In 2003, during the height of the predatory lending crisis, … [n]ot only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from … enforcing any of their own consumer protection laws against national banks.”
Predatory lenders’ partner in crime, How the Bush administration stopped the states from stepping in to help consumers, by Eliot Spitzer, The Washington Post, February 14, 2008.
Spitzer spilled the beans too soon. He soon lost his job as a result.
In reprisal for Spitzer’s revelations, the Bush II administration sicked the FBI on Spitzer, illegally violated bank secrecy laws and Spitzer’s constitutional rights and eventually discovered evidence of wrongdoing that it promptly used in order to bring about the governor’s downfall.