AP/LM Otero
It takes a Harvard MBA to raze an economy. Perhaps that is too narrow a judgment given that a law degree from that institution or from Yale University seems to serve as well. But the Harvard MBA is the degree that George W. Bush and his last treasury secretary, Henry Paulson, had in common, and their shared ignorance as they presided over the collapse of the U.S. economy is on full display in the former president's newly published memoir.
Bush makes clear that the economic crisis came late to his attention and that it was not until March of 2008, as the Wall Street investment firm Bear Stearns was tottering, that it dawned on him that something was seriously amiss: "I was surprised by the sudden crisis. My focus had been kitchen-table economic issues like jobs and inflation. I assumed any major credit troubles would have been flagged by the regulators or rating agencies." He assumed that because he had signed off on the Sarbanes-Oxley Act "[i]n response to the Enron accounting fraud and other corporate scandals."
It is instructive that this is the only reference in the memoir to Enron, a company headed by his old friend Ken "Kenny Boy" Lay, who chaired Bush's presidential campaign finance committee the year before Enron collapsed. The grief caused by Enron's contrived electrical blackouts and the lost jobs and savings following its collapse did not make for one of the "Decision Points" worthy of examination by Bush in his book of that title. Had he done so he might have discovered that the primary problem with Enron was not its fraudulent accounting but rather the wild trading practices in derivatives and other suspect financial gimmicks that had brought the company to its knees and which the accounting trickery was designed to conceal.
Enron was the dead canary, ignored by Bush, that predicted the banking meltdown. The "Enron loophole" in the Commodity Futures Modernization Act that Republicans pushed through the Congress and Bill Clinton signed into law in the last months of his administration opened the door to the collateralized debt obligations and other financial devices that proved so toxic to Wall Street. The securitization of housing debt in such packages spiraled out of control throughout Bush's watch, but he was clearly unaware of the problem until that market collapsed.
