So, Whose fault is this mess?

There are a myriad of people out there blaming President Obama and the Democratic congress for the economic woes we are going through. Those people claim that the millions of unemployed are his fault, or the democrats fault, because they ran congress from 2007. There are people who actually blame the Fannie and Freddie mess on the democrats. Let's scrutinize the meltdown so we can see the source of the problem, shall we?

The great recession of 2008, in which this nation lost millions of jobs, and saw the housing market implode, is still going on. Just because we are starting to get slowly back to our feet doesn't mean that it's over. It isn't. Not by a long shot. And when did this recession start?

December 2007. The democrats had been running congress for a whole 11 months, which means they must have done it, right?

Wrong.

Legislative and financial agendas dealing with economics take a long time to fully implement, and get moving. For example, It was 2003 when the Bush Administration did what it could to create an agency to regulate and oversee Fannie Mae and Freddie Mac. Two years later there was still nothing going on, the Republican congress simply failed to do anything about it, despite having said they intended to bring about legislation to do as the President asked.

In 2005,Chuck Hagel put forth legislation to regulate Fannie and Freddie, which then died in committee.

In 2004, Bush's SEC relaxed the net capital rule. Too inside business for you? Let me explain, it really is simple. The rule regulated broker-dealers (think the big banks and the like here) from betting too heavily, limiting the amount of debt they could take on. A gross generalization, but for spaces sake, I am keeping this simple. For a more precise definition of the term net capital rule, click here.

And who was the lead dog in asking for this rule relaxation? Then head of Goldman Sachs Henry Paulson, a true conservative who would later become treasury secretary.

Relaxing that rule made it possible for the big guys to bet more aggressively in derivatives, much more so than before. Mortgage backed securities, which tied the stock market and all the big banks to the housing market, skyrocketed as a result.

Subprime lending before the relaxation of the rule? Around 10% of all mortgage originations. After the rule was relaxed, the number of Subprime mortgages doubled. Coincidence?

The 1999 repeal of part of Glass-Steagall during a lame duck session of congress, signed into law by Bill Clinton also had a major effect on the crisis. It specifically prohibited regulation of securities based derivatives, swaps to be precise.

The lack of regulation of Fannie and Freddie, which neither the Clinton nor Bush White Houses nor years of Republican congresses dealt with properly, along with the ownership society mentality that pervaded the SEC, and originated in the Bush White House, made a mountain of a mess.

Now, with that as a yardstick, and a guide, let's ask the question again. Whose fault is this mess? What started the economic meltdown, the one whose effects we are still feeling today, which brought on everything from a stock market collapse to the housing bubble to today's crippling unemployment?

Can't blame Obama, Reid and Pelosi for it, not if you know what happened and care about the truth.

It's not to say there isn't blame everywhere to go around, but it is insanely disingenuous to point the finger of blame for today's mess, the mess of the last 3+ years, at a White House that has been in power 19 months, and a congress that has been in charge for 3+ years, when the lions share of the issues that created the mess originated before this White House and this congress rose to power.

Blaming Reid, Pelosi, Frank, Dodd and Obama for our current economic mess, without also blaming Trent Lott, John Boehner, Phil Gramm, Roy Blunt, Newt Gingrich, Denny Hastert, Hank Paulson and George Bush for the lions share of today's economic woes, is kind of like blaming the firemen for the fire.