Bush's Financial Katrina

By Dan Froomkin
Special to washingtonpost.com
Tuesday, March 18, 2008; 12:50 PM

As the storm clouds gathered, was President Bush once again asleep at the wheel?

A consistent theme in today's political and economic coverage is that Bush's failure to recognize the severity of the ongoing financial crisis and act accordingly is reminiscent of his disastrously slow and inept response to Hurricane Katrina.

Maura Reynolds and Janet Hook write in the Los Angeles Times: "In some ways it was a throwaway line, the kind of praise a boss tosses out casually. But as the economy teetered Monday, President Bush's words to Treasury Secretary Henry M. Paulson struck many as discordant and disengaged.

"'I want to thank you, Mr. Secretary, for working over the weekend,' Bush said as he met with his economic advisors at the White House. 'You've shown the country and the world that the United States is on top of the situation.'

"Actually, many analysts and critics said, by focusing on Paulson's working hours instead of on the fear gripping Main Street and Wall Street, the president seemed to show just the opposite -- that he has failed to grasp the gravity of the country's economic crisis.

"'He has no idea what's going on. Even by his standards, he's wrong,' said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, who said he had been trying to get the president to pay more attention to the economy for more than a year.

"Bush's 'working over the weekend' line also suggested a comparison to another disaster in which he was accused of acting too slowly: Hurricane Katrina. After the storm, the president was ridiculed for praising FEMA Director Michael D. Brown for doing 'a heck of a job' -- even as thousands remained stranded in floodwaters in New Orleans."

What's the equivalent of the broken levees this time around? "[S]ome economists and lawmakers said that the administration had too strongly resisted efforts to regulate either the mortgage industry or Wall Street's new mortgage-backed securities out of a misplaced faith in free markets," Reynolds and Hook write.

"Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said he had been trying to get the administration to tighten the rules for mortgage lenders for more than a year -- to little avail.

"'They could have done a lot of things over the last year, in my view, to make a difference and refused to do so,' Dodd said. 'They are lagging in terms of their response to all of this. Had steps been taken over the last year, we could have avoided a lot of this.'"

Matt Spetalnick writes for Reuters: "Not since Hurricane Katrina devastated New Orleans and other parts of the U.S. Gulf Coast in 2005 has Bush faced so much criticism of a too-little, too-late government response in a national time of need."

Spetalnick writes that Bush's "penchant for understatement in the face of what some on Wall Street see as the worst threat to the world financial system since the Great Depression has again underscored questions about his ability to lead through a major crisis.

"Some critics have accused him of being in a state of denial over the severity of the problem, which started last year with an imploding U.S. housing market and quickly spread to credit markets and the broader U.S. and global economy. . . .

"The White House defends Bush's approach. 'The president gets regularly updated,' White House spokeswoman Dana Perino said. 'And the president is extremely concerned.'"

Frederick Kempe writes in his Bloomberg opinion column: "The cost of faltering American leadership is growing as quickly as you can say Bear Stearns. . . .

"Much of what we are watching feels like an emerging-market meltdown to top international financiers: runaway debt, a declining currency, imploding markets, failing political leadership and the urgent need for outside intervention to provide emergency stability. . . .

"International financiers . . . fault George W. Bush for having failed to realize that he has another Katrina on his hands, this time of a financial nature, for which private-sector solutions are useful but not sufficient to keep the levees in place. They believe he has to deploy greater government means to send a message to the financial world that he is drawing a line in the sand. . . .

"As with the war in Afghanistan, the Iraqi war aftermath, the Hurricane Katrina disaster and current efforts at Mideast peace, investors are concerned that the president is responding too late and with inadequate understanding, resources and creativity."

Leaving the Less Fortunate Stranded -- Again

Meanwhile, Steven Lee Myers writes in the New York Times: "President Bush on Monday welcomed the Federal Reserve's sweeping intervention in the nation's financial markets as his administration faced accusations that it had supported the bailout of a prestigious investment bank while doing little to address the hardships of Americans facing foreclosures on their homes. . . .

"Mr. Bush's handling of the economy has vaulted to the top of the political agenda, where the White House would clearly it rather not be. He stood accused on one hand of violating his own ideological opposition to government intervention and on the other of not doing enough to protect the nation's economy from the disarray in the markets.

"'Now that the president has shown his willingness to bail out Wall Street at taxpayer expense, I hope he will drop his opposition to proposals designed to help ordinary homeowners,' Senator Harry Reid, Democrat of Nevada and the majority leader, said in a statement."

Scott Mayerowitz writes for ABC News: "Some critics have questioned why the government is using taxpayer dollars to bail out Wall Street titans, like Bear Stearns, while thousands of Americans struggle to stave off housing foreclosure and receive nothing.

"According to the National Community Reinvestment Coalition, corporations have received $230 billion in federal aid compared to nothing for homeowners. . . .

"Robert Brusca, chief economist at Fact and Opinion Economics, thinks the president hasn't gone far enough.

"'The administration seems to have no stomach for taking action,' Brusca told ABC News. 'This is a president that had no trouble intervening in Iraq, but does not want to intervene in the housing mess. It's as though we should worship the private sector even though it is what got us into this mess.'"

Paul Krugman asked in his New York Times opinion column on Monday: "When the feds do bail out the financial system, what will they do to ensure that they aren't also bailing out the people who got us into this mess?"

E. J. Dionne Jr. writes in his Washington Post opinion column: "The Wall Street titans have turned into a bunch of welfare clients. They are desperate to be bailed out by government from their own incompetence, and from the deregulatory regime for which they lobbied so hard. . . .

"It's just fine to make it harder for the average Joe to file for bankruptcy, as did that wretched bankruptcy bill passed by Congress in 2005 at the request of the credit card industry. But the big guys are 'too big to fail,' because they could bring us all down with them.

"Enter the federal government, the institution to which the wealthy are not supposed to pay capital gains or inheritance taxes. . . .

"So now the bailouts begin, and Wall Street usefully might feel a bit of gratitude, perhaps by being willing to have the wealthy foot some of the bill or to acknowledge that while its denizens were getting rich, a lot of Americans were losing jobs and health insurance. I'm waiting."

Bush as Hoover

Jennifer Loven writes for the Associated Press about how, "throughout the economy's recent turbulent times -- lost jobs, sky-high gasoline prices, plunging home values, a free-falling dollar, shaken consumer confidence, a growth slowdown and possibly even a recession -- Bush has projected an air of unwavering optimism, even joviality.

"He is the nation's biggest economic cheerleader at a time of deep uncertainty.

"'The United States is on top of the situation,' he declared Monday.

"It all has some people shaking their heads. Is there a disconnect here? Does the president get how this might feel to the little guy? Is there a different standard for the big financial community and the strapped homeowner facing foreclosure?"

Loven writes that readers should "remember Herbert Hoover, infamous for presiding over the onset of the Great Depression. . . .

"Hoover's reputation was built in part on remarks viewed as too rosy. 'The problem is not at all insurmountable in the long run,' he said on Oct. 6, 1930, as unemployment, poverty and desperation climbed."

ThinkProgress.org has more on the Hoover metaphor. For more on Bush's empty reassurances, see the "Legacy No. 2?" section of yesterday's column.

Is Awareness Dawning?

Matthew Benjamin and Alison Fitzgerald write for Bloomberg: "The accelerating crisis in U.S. financial markets may pressure the Bush administration to abandon its reluctance to act more aggressively to avoid a meltdown.

"President George W. Bush and Treasury Secretary Henry Paulson so far have responded to the upheaval by proposing a series of voluntary measures. The collapse of Bear Stearns Cos. amid a credit crunch and the near certainty of a recession are likely to prompt Paulson to get Bush to embrace a more activist approach, Democratic lawmakers say.

"'Paulson will tell him what to do,' said House Majority Leader Steny Hoyer of Maryland, who has spoken recently with the former chairman of Goldman Sachs Group Inc. 'Paulson gets the depth of the problems.'"

The Economic Legacy

Massimo Calabresi writes for Time: that "what was supposed to be the legacy saver for the Administration is shaping up to be its last, worst bad news story. . . .

"Some economists are now predicting a recession that could last into 2010. By then, the Bush presidency will be a memory, and it looks as if the last year of crisis, not the seven years of expansion that preceded it, may be what people remember."

But as the New York Times editorial board so effectively noted on Sunday, many of Bush's vaunted economic accomplishments weren't much to crow about in the first place.

And talk about a legacy: As the Calculated Risk blog recently pointed out, Bush may now be on his way to leaving behind a $10 trillion national debt when he leaves office.

Cheney's Obsession

It's an argument that even Bush no longer tries to make. But it looks like Vice President Cheney will go to his grave trying to convince people that Iraq and al-Qaeda had some sort of collaborative relationship before 9/11. Five years ago, of course, that was one of the main justifications for going to war.

Joshua Partlow and Peter Baker write in The Washington Post that Cheney "used the opportunity" of his visit to Iraq yesterday "to reassert that there was 'a link between Iraq and al-Qaeda' before the U.S. invasion, despite reports that have found no operational ties between the two. . . .

"Cheney's argument that Saddam Hussein's Iraq was tied to Osama bin Laden's al-Qaeda came despite a Pentagon study last week that found 'no smoking gun' to prove an 'operational relationship.' But the Weekly Standard, a conservative magazine that supports the war, published an article saying the report's executive summary oversimplified its findings, which it said bolster Cheney's case. . . .

"Cheney brought along [to Iraq] Stephen Hayes, the article's author and a biographer of the vice president, who asked why the White House was not pressing its argument further. Cheney said he had long known that Hussein supported a range of terrorist groups and that the new report 'pretty conclusively makes that case.'

"Noting that the report said there was no 'operational' link between Iraq and al-Qaeda, he said it documented 'extensive links with Egyptian Islamic Jihad,' a group headed bin Laden deputy Ayman al-Zawahiri, that later merged into al-Qaeda.

"'Now was that a link between Iraq and al-Qaeda?' he said. 'Seems to me pretty clear that there was.'

"Democrats in Washington leapt on Cheney's comments, comparing them to his prewar assertion that U.S. troops would be greeted as liberators and his 2005 declaration that the insurgency was in its 'last throes.' Senate Majority Leader Harry M. Reid (Nev.) said Cheney should instead figure out how 'to find Osama bin Laden and al-Qaeda's senior leadership -- neither of whom are in Iraq.'

"Former congressman Lee H. Hamilton (D-Ind.), co-chairman of the bipartisan commission that investigated the Sept. 11, 2001, attacks and found 'no operational relationship' between Iraq and al-Qaeda, said Cheney was parsing words to create a false impression.

"'They just keep repeating it -- the vice president uses the word "links," ' Hamilton said in an interview. 'Nobody really denies that. The question is 'Was there an operational relationship?,' and there's no evidence of that.'"

Here's the transcript of Cheney's short press conference yesterday. After calling on a few members of the White House press corps, Cheney closed with a pitch to Hayes. Kudos to the real reporter -- I think ABC's Martha Raddatz -- who tried to inject a little skepticism into the lovefest:

Cheney: "Steve Hayes."

Hayes: "Thanks, Mr. Vice President. Let me play to type, if I can, and ask a big-picture question. Lots of talk this week -- fifth anniversary week of the invasion -- about the case for war in Iraq. Last week, as you know, there was a report issued by the Pentagon that showed, among many other things, that Saddam Hussein had been supporting Ayman al Zawahiri, the Blind Sheikh. He had been training jihadists from Sudan and elsewhere in Iraq throughout the 1990s. He funded the precursor to Ansar al-Islam. I wonder if you could give me your thoughts on that report, and also explain why the White House isn't talking about it?"

Cheney: "Well, I've taken just a quick look at the summary portion of the report, Steve, and read an article in I think it was the Weekly Standard that dealt with the subject. I think there's never been any doubt in my mind but what Saddam Hussein was one of the prime state sponsors of terror in the world. He was designated that by the U.S. State Department.

"In addition to all the things you mentioned, he also used to provide $25,000 payments to the families of suicide bombers. I always hark back to the testimony of George Tenet, then CIA Director, gave in I think it was 2003 in public session -- this was open testimony before the Senate Intelligence Committee -- that there was a relationship between Saddam Hussein and al Qaeda that went back a decade.

"The fact is I think the report, to the extent I've been able to look at it, indicates pretty clearly that Saddam Hussein and the Iraqis had a relationship with a broad range of terrorist groups back in the '90s, and I think that if you read the report you're talking about, just released by the Defense Intelligence Agency, it pretty conclusively makes that case."

Hayes: "Why isn't the White House talking more about it? I mean, it seems like it pretty clearly backs up the kinds of arguments you were making before the war. Why so little talk about it?"

Cheney: "Well, I think it just came out within the last few days. So I haven't had any conversations with it, for example, with the press office. I just -- you'd have to ask them, or I'll ask them when I get home."

Reporter: " -- also says there's no link between al Qaeda and Saddam --"

Cheney: "Well, it says no operational link. But there was, as I recall from looking at it, extensive links with Egyptian Islamic Jihad. Egyptian Islamic Jihad was the organization headed by Zawahiri, and he merged EIJ with al Qaeda when he became the deputy director of al Qaeda, Osama bin Laden's number two.

"Now, was that a link between Iraq and al Qaeda? Seems to me pretty clear that there was. But it's a question -- I would urge you to go read the report. I know ABC reported on it. If you dig into the report in depth, I think you may find that there was an extensive relationship with a broad range of terrorist groups, that he was a state sponsor of terror and I don't think there's any doubt about that."

Reporter: "So you think there was a direct link between al Qaeda --"

Cheney: "You heard what I said. I was very precise."

Reporter: "Yes, you were."

Hayes and Cheney have collaborated many times before, most notably on Hayes's authorized hagiography: "Cheney: The Untold Story of America's Most Powerful and Controversial Vice President." Hayes was also the author of a November 2003 article, based on a leaked, top-secret and quickly discredited memo from Cheney loyalist Douglas J. Feith, which argued that Osama bin Laden and Hussein had an operational relationship. Cheney later cited Hayes's article in interviews.

Five Years Ago Today

Here's Bush on March 17, 2003: "Intelligence gathered by this and other governments leaves no doubt that the Iraq regime continues to possess and conceal some of the most lethal weapons ever devised. This regime has already used weapons of mass destruction against Iraq's neighbors and against Iraq's people.

"The regime has a history of reckless aggression in the Middle East. It has a deep hatred of America and our friends. And it has aided, trained and harbored terrorists, including operatives of al Qaeda.

"The danger is clear: using chemical, biological or, one day, nuclear weapons, obtained with the help of Iraq, the terrorists could fulfill their stated ambitions and kill thousands or hundreds of thousands of innocent people in our country, or any other. . . .

"All the decades of deceit and cruelty have now reached an end. Saddam Hussein and his sons must leave Iraq within 48 hours. Their refusal to do so will result in military conflict, commenced at a time of our choosing. . . .

"And all Iraqi military and civilian personnel should listen carefully to this warning. In any conflict, your fate will depend on your action. Do not destroy oil wells, a source of wealth that belongs to the Iraqi people. Do not obey any command to use weapons of mass destruction against anyone, including the Iraqi people. War crimes will be prosecuted. War criminals will be punished. And it will be no defense to say, 'I was just following orders.'"

Poll Watch

Gary Langer writes for ABC News on a new poll which shows Iraqis reporting improved security and economic conditions in their country. But look at the results and guess what? They overwhelmingly don't want us there anymore.

Among the findings:

* 73 percent -- including 95 percent of Sunnis -- oppose the presence of U.S. forces in Iraq.

* 61 percent say the presence of U.S. forces in Iraq is making security worse, rather than better.

* 42 percent think attacks on U.S. forces are acceptable.

* 46 percent think if American forces left, the security situation would be better, compared to 29 percent who say it would be worse.

Even offered a slew of fantasy options -- for instance, that U.S. forces should stay "until security is restored" or "until the Iraqi government is stronger" -- a plurality (38 percent) still said what they want is for U.S. forces to leave immediately.

Book Watch

Michiko Kakutani reviews "Daydream Believers: How a Few Grand Ideas Wrecked American Power" in the New York Times:

"American troops bogged down in Iraq, a resurgent Taliban in Afghanistan, an overstretched military and National Guard, simmering tensions with Iran and North Korea, and growing hostility toward the United States around the world: these are just some of the consequences of Bush administration foreign policy over the last seven years. To the Slate columnist Fred Kaplan, these woes all stem from two grand misconceptions held by the White House and its top advisers: that the world fundamentally changed after 9/11, when in fact 'the way the world works -- the nature of power, warfare and politics among nations -- remained essentially the same'; and that in a post-cold-war era, the United States 'had the power to set the terms of the new world order' and could therefore act unilaterally, without entangling alliances and without compromising 'with competing concepts or interests.'"

Kaplan "underscores the crucial role the speechwriter Michael Gerson, a self-described evangelical, played in linking the president's religious and moral imperatives with his expansionist foreign policy. And he argues that Elliott Abrams, a member of Mr. Bush's National Security Council (and a former Reagan administration official who was involved in the Iran-contra scandal), 'embodied both factions behind the administration's new policies -- the moral crusaders and the power-centric nationalists.'"

As for Bush, he "emerges from this book as a na┬┐ve, impulsive and stubborn leader, whose moral certitude and penchant for denial have made him more inclined to double down on a bad bet than ever to admit a mistake, a president whose post-9/11 search for a bold new approach to the world made him susceptible to neoconservative ideas of pre-emption and unilateralism that had gained little traction with his father or Bill Clinton.

"President Bush's strategies, Mr. Kaplan writes near the end of this incisive book, failed 'because they did not fit the realities of his era': 'They were based not on a grasp of technology, history or foreign cultures but rather on fantasy, faith and willful indifference toward those affected by their consequences.'"

Late Night Humor

On the Daily Show, Jon Stewart shows a clip in which CNBC anchor Mark Haines literally throws his hands in the air in disbelief after Bush's positive comments about the economy.

Stewart listens to Bush's constant repetition of economic affirmations and concludes that "must be his attempt at a Jedi mind-trick." But, Stewart says: "Here's the thing, Mr. President: In order for the Jedi mind-trick to work -- you have to be a Jedi."

Cartoon Watch

Steve Greenberg on the price of smugness; Ben Sargent on Bush asleep at the wheel; David Horsey on what Bush is on top of; Duane Powell on the cheerleader in chief; Joel Pett on Bush and Lady Liberty; Clay Jones on Cheney in the Middle East; Mike Luckovich on Bush's dog days.

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