Subprime Crisis Quotes

In 2001, Treasury Assistant Secretary Sheila Blair said:

"I believe that the Federal government should take a leadership role in encouraging private sector efforts to eliminate abusive lending practices, namely by encouraging the development of a set of industry best practices for subprime lending."

In 2004, acting Treasury Secretary, John Snow said:

"The current regulatory structure is not equipped to deal effectively with the current size, complexity and importance of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. We need a strong, credible, and well-resourced regulator with a clear mandate and all the powers of other world class financial regulators."

In 2005, a senior economist with the Federal Reserve of New York Jonathan McCarthy, disputed an accusation of a real estate bubble:

McCarthy did not dispute that there were some markets where housing prices have outstripped fundamentals, but he said that they are mostly along the eastern seaboard north from Washington D.C., as well as along the West Coast. "These areas will always tend to be more volatile," he said. "But on a national scope there's probably no housing bubble."

In 2007, Alan Greenspan, directly responsible for setting low interest rates that helped to allow credit and cash easier to access, driving up the market said:

“While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late, I really didn’t get it until very late in 2005 and 2006."

Earlier in 2008 Bill Clinton, who signed into law the bill removing the barriers between real estate banking and investment banking, blamed the economy rather than deregulation:

"If our economy was growing and people had general confidence in it, then this sub-prime mortgage crisis wouldn't have occurred," Clinton said.

Recently Bill Clinton clarified his position that allowing investment banks to trade in the commerical sector was not to blame:

"I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis."

In 2007 current Treasury Secretary Henry Paulson claimed the subprime crisis was effectively over, citing the strength of the market:

"The market has focused on this. There's a wake-up call, and there's an adjustment to this repricing of risk, but I see the underlying economy as being very healthy," he told reporters before leaving Beijing. Paulson added that he did not see anything that caused him to reconsider his view that the economic damage from the housing correction was "largely contained," despite losses in a number of financial institutions and a long period for subprime issues to move through the economy."

Earlier in 2008, Treasurer during the Clinton administration, Robert Rubin, despite overseeing billions of write-offs from the sub-prime crisis on Citigroup's Board of Directors (itself was a merger of Travelers Group and Citicorp enabled by the bill Clinton signed in 1999) said:

He told a small crowd at Manhattan's Cooper Union for the Advancement of Science and Art Wednesday that the problems now roiling the markets and forcing the Federal Reserve into a defensive posture are "all part of a cycle of periodic excess leading to periodic disruption," and that we are not in fact on the verge of a financial meltdown.

In his recent Address to the Nation, George Bush used very forceful language to coerce passage of the bailout bill he eventually signed:

"The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold: More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession."

In contrast, in 1999, Ralph Nader insinuated the bill Clinton signed created a potential repetition of the 1980 savings and loans scandal by creating firms that the government cannot allow to fail yet allowed massive insolvency risks:

"Congress is icing down the champagne again in anticipation of the signing of a new and much more grandiose deregulation package, this time of the entire financial services industry--combining banks, securities firms and insurance companies (and in some cases, nonfinancial corporations) under common ownership in soon-to-be trillion-dollar conglomerates. In the process, Congress is creating a financial system designed for the affluent customer in which low- and moderate-income families and small businesses will face less access, fewer choices and higher fees. Congress is wading into the deregulation swamp in good economic times with a roaring stock market and quarter after quarter of record financial profits--the worst possible time to ask Congress, with its short-term memory, to make tough decisions against the wishes of the industry. Amid the economic euphoria, it is little wonder that warnings about the safety and soundness of financial institutions, inadequate deposit insurance reserves and the weaknesses of an uncoordinated, overlapping and outmoded regulatory system are greeted with legislative yawns. A study released by the Federal Deposit Insurance Corp. (FDIC) last month found that consolidation in the banking industry just between the years of 1970 and 1997 had "increased the risk of insurance fund insolvency by 50 percent." The report warned that the risk had increased further during the past two years. The risk of insolvency is "becoming inseparable from the health of the 25 largest banking organizations which control 54.5 percent of the assets," the FDIC researchers found. These are the very institutions that will be combined with insurance companies and securities firms in the new, too-big-to-be-allowed-to-fail conglomerates."

In 2000, Nader testified before Congress about the "three Government-sponsored enterprises [GSE] which dominate the housing finance markets" (Fannie Mae, Freddie Mac, & the Federal Home Loan Banks):

"H.R. 3703 eliminates one of the most egregious forms of corporate welfare—a standby line of credit that could be drawn from the Treasury if the GSEs fell on bad times...All these links are evidence in the eyes of the market that the Federal Government would rush to bail out the GSEs if they were in serious financial trouble. The market looks on these entities as fail-safe organizations...National banks may invest no more than 10 percent of their capital in corporate bonds of one issuer. But, because of the special GSE provision that I noted earlier, bank investments in GSE debt securities are not limited...As this Committee proved in the enactment of reforms in the wake of the savings and loan debacle, bipartisan coalitions can be formed successfully on safety and soundness issues in the oversight of Federal regulation. This should happen now while the GSEs are prosperous, not when the fortunes of these institutions are sagging. Some Members may feel these institutions are so strong and so wealthy there is no need for the protections incorporated in H.R. 3703. They see no possibilities of downturns in their fortunes. But this ignores history. Few foresaw the collapse of the savings and loan industry. Even fewer believed tax money would be used to bail out insured institutions. But it happened, and the regulators, and for that matter the whole Nation, were poorly prepared for the disaster."