Further explanation from Dean Baker of CEPR:
Everyone should understand that we are in this mess for two reasons. First the financial regulators, both in the Bush administration and more importantly at the Fed, were completely asleep for most of the decade. As the housing bubble grew to ever more dangerous proportions, and lenders adopted increasingly questionable lending practices, the regulators did nothing.
As Paul Krugman of the NY Times explains, the current problems stem directly from the housing bubble's collapse:
Unfortunately, it doesn't seem as though Bush was very educated about how the economy worked before he entered the Oval Office. During a talk on the 23rd, he sure didn't talk as though his economic knowledge was very wide or deep.
"Well, my first instinct wasn't to lay out a huge government plan. My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became.
The full talk is at the link, but I read that and I'm like "Wow! Did this guy not know that the economy was very highly 'interlinked'?!?!?!" And when someone doesn't know much about the economy, is it really a good idea to "act boldly"?!?!? Really?!?!
Actually, the final bail-out plan that was voted on appears to have been a pretty good one. Krugman did not like Treasury Secretary Paulson's initial plan. Baker also didn't like it:
But Krugman approved the re-worked plan that was voted on upon the 29th:
Why didn't the bill pass?
And let's also consider the Bush Administrations record in handling huge amounts of cash. These guys have a well-documented record of flushing billions and billions down the toilet.
Many people also noticed Section 8 of the bail-out plan:
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency. [emphases added]This section simply made any trust in the administration absolutely impossible and made it necessary for Democrats to extensively re-work the proposal. That wasn't enough to save the plan, though.
The Republicans tried claiming that they couldn't vote for the bill because Speaker Pelosi was mean to them. A claim they later backed off on. Other conservatives came up with similarly unconvincing reasons as to why the crisis occurred in the first place. As the blogger emptywheel says:
Personally, my answer is that first, we have to remove Republicans from power. Getting Blue Dog Democrats out would be a good thing too. But there are simply no good solutions possible with the current crew in office.