Bush's first budget, written in 2001 — seven years ago — called runaway subprime lending by the government-sponsored enterprises Fannie Mae and Freddie Mac "a potential problem" and warned of "strong repercussions in financial markets."
In 2003, Bush's Treasury secretary, John Snow, proposed what the New York Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." Did Democrats in Congress welcome it? Hardly.
"I do not think we are facing any kind of a crisis," declared Rep. Barney Frank, D-Mass., in a response typical of those who viewed Fannie and Freddie as a party patronage machine that the GOP was trying to dismantle. "If it ain't broke, don't fix it," added Sen. Thomas Carper, D-Del.
Unfortunately, it was broke.
In November 2003, just two months after Frank's remarks, Bush's top economist, Gregory Mankiw, warned: "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole." He too proposed reforms, and they too went nowhere.
In the next two years, a parade of White House officials traipsed to Capitol Hill, calling repeatedly for GSE reform. They were ignored. Even after several multibillion-dollar accounting errors by Fannie and Freddie, Congress put off reforms.
In 2005, Fed chief Alan Greenspan sounded the most serious warning of all: "We are placing the total financial system of the future at a substantial risk" by doing nothing, he said. When a bill later that year emerged from the Senate Banking Committee, it looked like something might finally be done.
Unfortunately, as economist Kevin Hassett of the American Enterprise Institute has noted, "the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter."
Had they done so, it's likely the mortgage meltdown wouldn't have occurred, or would have been of far less intensity. President Bush and the Republican Congress might be blamed for many things, but this isn't one of them. It was a Democratic debacle, from start to finish.