Bush's Peculiar Wall Street Speech

by: Felix Salmon November 13, 2008 | about stocks: FNM / FRE    
Felix Salmon

Felix Salmon

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Bush's speech on Wall Street today is a most peculiar thing -- a mixture of free-market platitudes, cryptic code, and outright weirdness. For instance, what does this mean?

One vital principle of reform is that our nations must make our financial markets more transparent. For example, we should consider improving accounting rules for securities, so that investors around the world can understand the true value of the assets they purchase.

"Accounting rules for securities" -- that sounds like mark-to-market, right? But even the people who want to abolish mark-to-market accounting don't go so far as to say that doing so will improve transparency or make "the true value of assets" more obvious. This statement is the kind of thing which would be made by someone urging a move to mark-to-market accounting, not a move away from it. Does Bush think there isn't enough mark-to-market accounting?

Bush then continues:

We should move forward with other significant reforms to make the IMF and World Bank more transparent, accountable, and effective. For example, the IMF should agree to work more closely with member countries to ensure that exchange rate policies are market-oriented and fair.

Is this a reference to China? Is Bush really trying to outsource to the International Monetary Fund responsibility for getting China to play nice with its exchange rate?

After that, Bush gets downright disingenuous:

We must recognize that government intervention is not a cure-all. For example, some blame the crisis on insufficient regulation of the American mortgage market. But many European countries had much more extensive regulations and still experienced problems almost identical to our own.

Yes, George -- because they bought American mortgages! But he's not done with this theme:

History has shown that the greater threat to economic prosperity is not too little government involvement in the market - but too much. We saw this in the case of Fannie Mae and Freddie Mac. Because these firms were chartered by Congress, many believed they were backed by the full faith and credit of the United States government. Investors put huge amounts of money in Fannie and Freddie, which they used to build up irresponsibly large portfolios of mortgage-backed securities. When the housing market declined, these securities plummeted in value. And it took a taxpayer-funded rescue to keep Fannie and Freddie from collapsing in a way that would have devastated the global financial system. There is a clear lesson: Our aim should not be more government - it should be smarter government.

Oh, come on. The problem with Frannie wasn't "government involvement in the market" -- it was government deliberately exempting Fannie (FNM) and Freddie (FRE) from the capital-adequacy rules which applied to everybody else, and thereby encouraging them to maximize the amount of leverage they took on -- all in the name of "encouraging homeownership". What we needed was precisely more government: a Frannie regulator with teeth, and a government which refused to let nominally-private corporations lever up to obviously-dangerous levels. The implicit government guarantee wouldn't have been a problem if it wasn't for the amount of leverage involved.

But even if you concede Bush's point about Frannie, it's still weird how contentious and cryptic he's being elsewhere in the speech. What's the signal he's trying to send, and who is he trying to send it to? Does he really think that the G20 summit is going to be full of people lauding the merits of the economic system in Cuba? I'm rather puzzled by the whole thing.

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This article has 19 comments:

  •  
    Nov 13 01:03 PM
    Felix Salmon: These comments by President Bush are standard fare for almost all politicians, not wierd or cryptic. Get your shots in now, because soon President Bush leaves us and we all await the Obama Plan. Two years of campaigning and hundreds of hours of investigative journalism, and we still are breathless, awaiting the arrival of our savior.
    Reply | Link to Comment
  •  
    Nov 13 01:14 PM
    Bush doesn't know the details! He's giving a from the hip overview of his limited knowledge and honestly, as a president with the amount of circus acts going on during his presidency, how could he be expected to know in great detail, everything going on.
    The banks are running the show. They shut Wall St. down when they don't get their way.
    Now they promise not to use the bail out for bonuses.
    The heck with a promise, make it criminal to do so.
    Hank Paulson's learning how deep and nasty this situation is and realizes trillions won't bail out what happens to FRE and FNM on November 17.
    They were supposed to report Nov 4 but notice how the earnings date has moved to the 17th, two days after the cut off for selling for this years tax loss.
    I think FNM is looking at a minnimum -$7 a share.
    Hank's going to have to decide if they live or die and death means a 7 trillion dollar hit until the dust clears.
    That much loss will self perpetuate the downward spiral of housing prices and it's going to take a long time to get this situation out of vapor lock.

    When Hank only realizes this days from ground zero - there's no wonder Bush doesn't know what he's talking about.
    Reply | Link to Comment
  •  
    Nov 13 01:16 PM
    It will be news only if Bush denounces 'free trade.' And if Friedman of the NYT does the same, hell will freeze over.
    Reply | Link to Comment
  •  
    Nov 13 03:38 PM
    The only peculiar thing is the author .President Bush gave an inspiring speech ,perhaps not optimistic enough.
    The implemented policies and the global cooperation in addressing the perceived debacles will work effective andwill create a dynamic economic/market rebound .
    Thwe warnings ? should have been issued a year ago -I did .
    Now the nonsense from the peanut gallery will not stop unprecedented rebound in the period ahead .
    Now ,let's hear another end of the iniverse story from the author.
    Reply | Link to Comment
  •  
    Nov 13 03:40 PM
    Mea Culpa...the sentence should read will work effectively and will....
    Reply | Link to Comment
  •  
    Nov 13 04:00 PM
    WHEN WILL HE SAY THIS MESS IS MY FAULT BECAUSE OF MY NO REGULATION POLICIES . I HEREBY EXILE MYSELF TO IRAQ. HIS SONG IS " I DID IT MY WAY..................Y... ALL LOSE"
    Reply | Link to Comment
  •  
    Nov 13 04:31 PM
    Unrecovered alcoholic with a pathological inability to take responsibility for anything. Extends out to most believers in Republicanism. Now that every single least little aspect of that philiosophy is an undeniable disaster, they need to find someone to blame. Oh! Wait! Let's blame Obama! Pathetic. Maybe there are some good meds for that. "Just give corporations everything they want and it will all work out" it turns out, didn't work out. The fox did a lousy job guarding the henhouse but then again I could have told you it would and we could have skipped all this braggadocio followed by all this misery....
    Reply | Link to Comment
  •  
    Nov 13 06:33 PM
    Felix the cad
    the wonderful wonderful cad
    you'll laugh so hard your sides will ache
    when you realize you've be had
    reading Felix, the anti-bush cad
    Reply | Link to Comment
  •  
    Nov 13 08:33 PM
    Did you honestly expect anything besides rah-rah cheer leading and meaningless platitudes?

    What W knows about economics or the market wouldn't fill a thimble halfway. It's pathetic really, and I'm a lifelong Republican saying that.

    We have let our government, Republican and Democrat alike, lead us to ruin over the past 4 decades. What we have sown we are now about to reap.
    Reply | Link to Comment
  •  
    Nov 14 12:52 AM
    there was nothing wrong with the bush speech. i agree with it. the problem is that the speech does not agree with the events that transpired, or the situation.

    smarty is right. neither political party has the balls to properly nurture capitalism. they are creating a mess that my grandchildren will still be dealing with when they are my age.
    Reply | Link to Comment
  •  
    Nov 14 02:08 AM
    They won't be happy until they have total control. Shhh( communi) Shhh
    The Red menace is still alive.
    Reply | Link to Comment
  •  
    Nov 14 08:26 AM
    Yes, Bush doesn't have a clue, never did, and can't wait to get back to Texas, where perhaps he can find one more business to drive into the ground before he retires. Then he can go on the speaking circuit and do crummy Sammy Davis impersonations of "My Way" while watching the economy tank. And to think he was voted in twice!
    Reply | Link to Comment
  •  
    Nov 14 09:03 AM
    The comments above forget the balance/counterbalance of the elected system. What were the house and senate finance committees doing all this time? As far as I can see it they almost acknowledged the problems but did nothing until there was a failure. Fannie and Freddie got attention by default. The current crisis was sitting out in the open for quite some time. Any half intelligent person could see the problem coming but it got shelved until it has become near out of hand. Question for those with political statement s is why is your man not also culpable.

    Its easy to blame Bush but I think Franks and Waxman are both do nothings until it hits the fan. Then they, along with many others, go into political gear. Its time the country evolved by working on long term policy for economic, energy and other issues to dovetail into good public policy. To of ten there is an emergency of the day or week etc
    Reply | Link to Comment
  •  
    Nov 14 09:10 AM
    Bush bashing is in STILL and will continue at least 4 more years to clear the way for Obama's mistakes. He was not the WORST president (hello Carter) ever and actually had few profound successes given he had a hamstrung Republican thin-majority congress for 6 years followed by 2 years of a super-wealthy-finance-... congress.

    The speech was an attempt to boost confidence for investors. Lots of platitudes. Bush has never been a great communicator - perhaps his biggest fault along with his unrelenting staff loyalty (also Nixon's undoing). In most cases when Bush appears to talk in recent times - the market goes DOWN. It is interesting his talk helped it go UP this day.

    Free market capitalism took near fatal blow in Sept 2001 because that event turned even die-hard conservative adam-smith worshipers into Keynesian dietary dependents to help resolve the worldwide financial disaster. It opened the gates wider for free money out of Frannie with NO oversight thanks to and even more Keynesian dependent Democrat leadership. The current mess then is merely the final wave of the 2001 attack aftershocks.

    Bush - who cannot successfully talk his way out of a paper bag - was an easy target for eight years of Democrat abuse. Any blame due to Democrats was easily deflected to Bush. Now - the very people who refused oversight of their financial domain of Frannies are in charge of the cure. American politics is so funny it should be syndicated.
    Reply | Link to Comment
  •  
    Nov 14 09:34 AM
    I believe the fall of FNM and FRE did not start in the Bush era. It was a build up of what President Carter did to make housing more affordable and President Clinton did telling FNM and FRE to lighten up on their stardards. They both in good earnest tried to spread the wealth and it did not work.
    Reply | Link to Comment
  •  
    Nov 14 09:43 AM
    we can't blame king george iii bush-it for the world mess .... we can blame the idiots that voted the idiot into office! his legacy will be identified as THE WORST PRESIDENT EVER! hurry Jan 20th 2009..... before he can add more disgrace to his "legacy"....... please HURRY!
    Reply | Link to Comment
  •  
    Nov 14 10:54 AM
    "mission accomplished" & "im the decider" in between spouting nonsense is busy deciding who gets on his pardon my cronies list. i guess libby is #1.he came in with a huge surplus & great economy & goes out with one of the biggest messes thats infected the whole world(with our phony AAA rated worthless paper).this is an independent voter voicing this opinion.anybody find it strange that the rep.party no longer has one house member from new england.listen & read the sore loser carping of the party.they took a pasting now 2x & cant learn to save the little influence they have for some good legislation in congress.they put an old geezer & a nobody on the ticket & are surpised by the electoral #s.they turned this country towards socialism be ashamed of this administration. you had control for 6 of the 8 years & all you could do was sex scandals & waste on stupid state projects.would the bridge to nowhere have been a toll bridge for the benefit of that felon sen stevens?
    Reply | Link to Comment
  •  
    Nov 14 11:08 AM
    Spoken like a true maverick!
    That cowboy is all hat, no cattle.
    Put him out to pasture, please!
    Reply | Link to Comment
  •  
    Nov 14 03:40 PM
    The imbecile who has presided over the biggest government bailout in human history and who has never been accused of being intelligent argued:
    "History has shown that the greater threat to economic prosperity is not too little government involvement in the market, but too much. Our aim should not be more government, it should be smarter government. The answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market system."

    Bush is an idiot! We all know it. Being an idiot is the highest rank he has been able to achieve. He has done more to destroy the U.S. than any recent avowed enemy. We're getting rid of him as President, so why doesn't he just shut up? People voted for Obama to get rid of him. If he had any brains he would shut up. The fact that he does not shut up, proves that he has no brains.

    Reply | Link to Comment
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